What is the difference between R7 and R9 credit rating?
An R1 rating means you make payments on time, whereas an R9 means you have declared bankruptcy. If you have filed a consumer proposal, you will have an R7 rating—a very low credit score that will remain unchanged until your proposal ends.
The R7 rating is a specific code used by credit bureaus to indicate that you have entered into a consumer proposal. This code alerts potential lenders and creditors that you are undergoing a debt settlement process.
The number component is coded on a 1-9 scale, where 1 means you've paid what you owe as agreed and higher numbers indicate an increasing degree of deficiency. For example, an R9 rating could indicate that a revolving debt has been placed for collection or that a bankruptcy has been recorded.
R9 credit can be resolved in one of a few ways:
1. You can pay the debt in full – it should be removed 7 years from the date the debt has been paid in full. 2. You can make a settlement on the debt with your creditor(s) the R9 credit should be removed from your credit 7 years from the date it is reported as settled.
Despite the R7 credit rating, your credit score is not the only factor lenders consider. While traditional lenders may be cautious, there are specialized mortgage lenders who cater to individuals with unique financial histories. Working with these lenders can increase your chances of approval.
Debts in a consumer proposal are coded as R7 on a credit report, meaning you've agreed to settle them with your creditors. For some perspective, a rating of R1 is considered to be perfect credit, while bankruptcy is recorded as R9. R9 is essentially the lowest rating someone can have.
A consumer proposal will stay on your credit report for 3 years after you've finished paying it off. If you are able to finish paying off your consumer proposal in 3 years, the R7 rating will stay on your credit report for a total of 6 years. This being the case it makes sense to pay it off as quickly as possible.
When you file for bankruptcy and get an R9 on your credit rating, that will stay on there for six years after the bankruptcy is discharged as long as this is your first bankruptcy. It can stay on for fourteen years if it is a second bankruptcy.
The bad news is that an R9 credit rating will have a big impact on your mortgage application. The worse news is that you may have an R9 credit rating already if your accounts are past due and in collections. After filing your first bankruptcy you will have an R9 credit rating for 6 years following your discharge.
An "R" rating is also included in your credit score. This rating is assigned by lenders based on your past history of borrowing and paying off debts, and it can range from 1 through 9. An R1 rating is the best, meaning you pay your debts on time, within 30 days, and an R9 is the worst.
How to fix R9 credit rating?
A simple update could change your report. If the R9 is related to unpaid debts, you will want to tackle those as soon as possible. Make a commitment to repay your creditors. If your debts are overwhelming and you don't think you can manage the repayments, you should contact a licensed insolvency trustee.
Most negative items should automatically fall off your credit reports seven years from the date of your first missed payment, at which point your credit score may start rising. But if you are otherwise using credit responsibly, your score may rebound to its starting point within three months to six years.
Your original creditor may be most willing to take your debt back if you have already worked out a plan with your debt collector and begun repaying what you owe. So, if you want to bypass a debt collector, contact your original creditor's customer service department and request a payment plan.
The higher your score, the lower the interest rate you'll be charged. For illustration only: On a $300,000, fixed-rate 30-year mortgage, the average rate is 6.41% (as of Thursday) if your credit score is in the 760-to-850 range, according to FICO. This would make your monthly principal and interest payment $1,878.
Credit Scores After an Insolvency Filing
A Consumer Proposal will be on your credit history for the lesser of: three years after your Consumer Proposal is finished – OR – six years from the date your Consumer Proposal started.
A consumer proposal will affect your credit rating, but less drastically than a Bankruptcy. While both options make it less likely that you will be able to obtain credit a Consumer Proposal will only stay on your record for three years after your last payment.
Your score falls within the range of scores, from 300 to 579, considered Very Poor. A 427 FICO® Score is significantly below the average credit score. Many lenders view consumers with scores in the Very Poor range as having unfavorable credit, and may reject their credit applications.
A consumer proposal filing makes good sense if you have a large amount of unsecured debt and a stable monthly income. If you can still repay at least 25% of your total debt over a five-year period, it's likely that creditors will accept a consumer proposal to avoid losing the entire loan balance in a bankruptcy.
A 427 credit score can be a sign of past credit difficulties or a lack of credit history. Whether you're looking for a personal loan, a mortgage or a credit card, credit scores in this range can make it challenging to get approved for unsecured credit, which doesn't require collateral or a security deposit.
The time it takes to raise your credit score from 500 to 700 can vary widely depending on your individual financial situation. On average, it may take anywhere from 12 to 24 months of responsible credit management, including timely payments and reducing debt, to see a significant improvement in your credit score.
What are the disadvantages of a consumer proposal?
- If the majority of your creditors vote against the Proposal, you may have to file for Bankruptcy.
- It typically takes four to five years to repay a Consumer Proposal, which is longer than a typical Bankruptcy.
- Your payments are fixed.
The debt will likely fall off of your credit report after seven years. In some states, the statute of limitations could last longer, so make a note of the start date as soon as you can.
While an account in collection can have a significant negative impact on your credit, it won't stay on your credit reports forever. Accounts in collection generally remain on your credit reports for seven years, plus 180 days from whenever the account first became past due.
Paying all of your bills consistently is key to a good credit score. While paying your cellphone bill won't have any automatic impact on your credit score, missing payments or making late payments can cause your credit score to drop if your cellphone account becomes delinquent.
While closing an account may seem like a good idea, it could negatively affect your credit score. You can limit the damage of a closed account by paying off the balance. This can help even if you have to do so over time.
