Unless you do all your business in cash, you probably have a credit rating. It contains a number and a letter.
The number – between 0 and 9 – shows how fast you pay your bills. “1” means you pay your bills quickly, while “9” means you never pay them.
The letter tells lenders the type of credit you use:
- “ R” stands for revolving, and is the most common. If you have a credit card, you will have an “R” credit rating.
- “ I” stands for instalment. This means you borrow money once, then make regular payments. Leasing that sports car will give you an “I” rating.
- “ O” means open, like a line of credit. Here the money you borrow is due at the end of a set period.
Unlike the movies, an “R” rating isn’t bad! If you pay your credit card bills in full every month, you’ll rate an “ R1.” That’s as good as it gets. But if you skip town without paying, or declare bankruptcy, you’ll be at the bottom of the chart – “ R9.”
Learn more about the different credit rating levels in this simple chart.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.