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Understanding debt ratings in your credit report

R1, M4, I7... What are those codes in your credit report?


No! This isn't bingo, this is how your debts are rated: a letter paired with a number. Lenders send in these codes to credit reporting agencies so that they know in just a glance how and when you make your payments. Now, each one of the components have a specific signification:


I: Installment credit. That's when you borrow money for a specific period of time and repay it in fixed amounts, on a regular basis, until the loan is paid off. (ex.: car loan) O: Open status credit. That's when you can borrow money when you need to, up to a certain limit. (ex.: line of credit) R: Revolving or recurring credit. You can borrow money up to your credit limit on an ongoing basis. You make regular payments in varying amounts depending on the balance of your account. (ex.: credit card) M: Mortgage loan. Mortgage information may be included on your credit report.


Those letters are then paired with a number from 1 to 9, 1 meaning you paid everything on time and 9 meaning bad debt, bankruptcy, sent to collection agency... in short, not something you want to have on your credit report! In more details:


0: Too new to rate, approved, but not yet used

1: Paid within 30 days of billing, the person pays as agreed

2: Late payment: 31–59 days late

3: Late payment: 60–89 days late

4: Late payment: 90–119 days late

5: Late payment: more than 120 days late, but not yet rated“9”

6: This code is not used

7: Making regular payments under a consolidation order, Orderly Payment of Debts, consumer proposal or Debt Management Program with a credit counselling agency

8: Repossession

9: Written off as a “bad debt”, sent to collection agency, bankruptcy


In short, the lower the number, the better. Going from a higher number to a lower one is possible and this is where Direct2Wheels comes in! We want to help you better your credit while getting into the vehicle that fits your needs and budget.


Got other questions about your credit? Contact us today!

Email: finance@direct2wheels.ca

Call or Text: 403-505-0642

Phone: 403-505-0642
Email: finance@direct2wheels.ca
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