What Is the Highest Credit Rating Available?

Credit ratings can go from R0 to R9. The highest credit rating you can receive is an R1. The "R" stands for revolving account. The rating you receive will depend on how you pay your various credit accounts.

Definition

An R1 means that you are paying a creditor on time or as agreed. Payments are received before they are 30 days late.

Effects

When an account has a number of accounts that are rated R1, it will have a positive effect on your credit report. This will increase your credit score.

Bad Debt

The lowest credit rating you can receive is an R9, which is a bad debt. This is an account which has not received a payment in 180 days, and the creditor has written it off of its receivable listing and recorded it as a loss. The account is then turned over to a collection agency.

30 Days

An R1 can turn into an R2 if a payment is 30 days late but less than 60 days. When an account is reported as an R2, it can eventually return to an R1 if payments are made on time for a substantial period of time such as a year.

60 Days

An R1 can turn into an R3 if payments are more than 60 days late.

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What Happens to My Credit Rating If I Pay Off All My Credit Cards?

Your credit score is sensitive to many different financial actions. For instance, the score increases when you make timely payments and drops when you send money late. Scorers consider all your accounts, including credit cards, and your credit rating is affected if you pay off all of the cards.

Benefits

Your score goes up when you pay off any account, including installment loans like auto financing and student loans, but revolving debts like credit cards have the biggest positive impact. MSN Money writer Liz Pulliam Weston explains that your score benefits even if you just reduce the balances without entirely paying off the cards, as long as you get the balances down to 30 percent of the credit limit or lower.

Drawbacks

Over time, your credit score can actually drop from paying off all your credit cards. Lenders want to see that you are managing your finances properly. You will not show a current payment history on your credit reports if you pay off all your accounts and stop using them altogether. Pulliam Weston recommends using them regularly for small purchases, especially if you have had the accounts for a long time. MyFICO.com explains that part of your score comes from the length of your history. Older paid-off cards that go unused for long time periods lose their positive effect.

Considerations

You do not necessarily help your credit score if you pay off a delinquent credit card that was charged off by the issuer. Bankrate.com columnist Steve Bucci explains that banks charge off accounts when a person stops paying for about six months. The bank gets a tax benefit, and the charge-off goes on Experian, Equifax and TransUnion credit reports and pulls down the consumer's credit score. You can call the creditor and arrange payment, but a paid charge-off is still very damaging. Ask the bank to erase the charge-off from your credit reports or alter the status to "paid as agreed" as a condition of your pay-off. Either of these changes helps your credit rating.

Process

Focus on your credit card accounts with the highest interest rates if your pay-off plan is stretched over time. Interest is assessed monthly, so a big chunk of each payment goes to that month's interest charge rather than reducing the actual balance. Consider making the biggest possible payments on your high interest accounts. Move that money to your other accounts once the high rate cards are paid off.

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How to Apply for a Mobile Home Loan After Bankruptcy

Bankruptcy can be a serious black mark on your credit report. It will make obtaining loans very difficult but not impossible. Bankruptcy can actually help you get a fresh start and eradicate debts owed in the past. Cleaning up credit will make it easier to qualify for a mobile home loan as long as you can prove you are financially responsible.

Instructions

1

Improve your credit score after filing for bankruptcy. One of the most important things lending institutions are looking for is financial responsibility. After a bankruptcy, you will need to make timely payments, obtain a secured credit card or two, and keep a low debt to income ratio.

By opening a secured credit card, you can improve credit history and increase your FICO score. This score is what lenders look at when determining trustworthiness for a home loan. Keep a low balance on this card or any other credit card you have. Running up a high debt or maxing out your card will lower your credit score. Make payments on time on all of your credit cards as well as other bills you must pay frequently.

2

Save enough money for a down payment on a mobile home. The likelihood of qualifying for a "no money down" loan for a home after bankruptcy is very slim. It is standard to place 10-20% of the mobile home cost as a down payment. With a bankruptcy, you may need more like 25-50% of the total cost. The more money you can put down, the more likely you are to get financed.

3

Prove that you have a steady income. A regular income from an employer that you have been with for a long period of time will cast a favorable light on you. Someone who has only had a job for a few months, receives sporadic payments such as those with freelancers and the self employed, and has job-hopped will have a more difficult time obtaining financing for a mobile home. It may still be possible, but you and your lender want to be certain that you can make the regular monthly mortgage payments.

4

Be patient if you are unable to get reasonable financing. Sometimes it is better to wait at least two years after filing bankruptcy so your credit score has time to improve. If your credit history is stable after that period of time, you are likely to receive a better loan rate than if you try to buy immediately after bankruptcy.

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A Guide to Credit Ratings

There are good reasons to establish a credit rating. Ratings or scores are three-digit numbers between 300 and 850. Higher ratings signal good credit habits, whereas a score below 650 indicates credit problems. But even if you know very little about credit ratings and factors that affect your score, you can educate yourself and build a high rating.

Importance

The importance of a good credit rating is apparent when applying for vehicle financing or buying a home. Everyone has three credit ratings because there are three credit bureaus. Lenders check all three ratings and use the average of your scores to determine if you can get a loan. Because ratings impact approvals and the rate you receive on a loan, it's vital to establish good credit habits. Some lenders set the credit minimum high, wherein you may need a score of 680 or higher to qualify for prime rates on loans.

Payments to Your Creditors

Credit scores are based on numerous factors, and payment history accounts for 35 percent of your personal credit rating. With that said, payment habits can either increase or decrease your rating. Regularly paying your bills on time every month and avoiding late payments will help your score.

Debts and Your Credit Rating

Never underestimate the impact of high debts. Credit ratings drop when you carry excessive credit card debt because the amount owed makes up 30 percent of scores. Signs of credit card debt problems include maxed-out accounts or accounts with balances greater than 30 percent of your credit limit. And if applying for a loan or another credit account, lenders will review your credit report and take note of high balances and likely reject your credit application. Pay down debt to fix a low credit rating.

Considerations

Together, payment history and debts account for 65 percent of your credit score. Factors that influence the remaining 35 percent of your score include length of credit history, credit applications and the mixture of accounts. Building a good rating involves more than paying on time and keeping debts low. Individuals with a long credit history usually have higher ratings; and someone who frequently applies for new lines of credit may have a lower score than someone who only applies for credit when necessary. Inquiries account for 10 percent of your score, whereas length of credit accounts for 15 percent of your score. Types of credit account for the remaining 10 percent of your score, and increasing your score calls for acquiring a mix of credit -- perhaps an auto loan, student loan and credit card.

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Collections and Credit Rating

Your credit rating encompasses the information on your credit reports and your credit score as calculated by FICO and the Equifax, TransUnion and Experian reporting agencies. Many credt-related factors influence your rating, the Federal Reserve Bank of San Francisco explains. You look bad to creditors when you stop paying your accounts and they get turned over to collection agencies.

Definition

Collections on your credit report refer to accounts that have been turned over to a debt collection agency. The original delinquent account shows up, as well as a collections entry. Liz Pulliam Weston, a MSN Money website writer, explains that lenders usually write off unsecured debts like credit cards that go six months with no payment. This action does not absolve you of paying the debt. The lender gets a tax benefit and then sells the account to a collection agency, which continues to pursue you for payment.

Effect

Collections fall under "payment history" when your credit score is calculated, according to the MyFICO scoring information site. This area accounts for 35 percent of the total score, so collection debts drop your score significantly. Lenders who see collection entries on your credit reports may reject your applications because they know you defaulted on other bills. Collection agencies can often take you to court, depending on your state laws, and win a judgment against you for the bill. The court action is added to your credit reports and makes your rating even worse.

Considerations

Collection agencies sometimes agree to stop reporting an account to the credit bureaus in exchange for a lump sum settlement. Offer less than the actual amount because they pay very little for debts and make a profit even if you get a discount. Ask them to provide written documentation of their promise to stop reporting the item before you send the money, Bankrate debt adviser columnist Steve Bucci recommends. Your credit rating improves as soon as it is gone.

Time Frame

Collections do not stay in your credit bureau files forever. These entries get erased seven years from the day you missed your first payment, even if you never pay the bill, the Federal Trade Commission explains. Their effect goes down as the year pass because creditors pay more attention to your recent records. Beware of trying to settle a collection account that will drop off your reports soon. Bucci warns that this might rekindle the agency's interest in aggressively pursuing it if you do not reach a settlement agreement.

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How to Freeze People From Pulling My Credit Report

Too many inquiries about your credit reports could drop your credit score several points. Your credit score affects your ability to get loans and the interest rates you pay on those loans. You can effectively prevent people from pulling your credit reports by contacting the three major credit rating bureaus. Freezing your credit reports will prevent others from looking at your credit history and credit score and using that information for fraudulent purposes, but it also will prevent you from obtaining credit cards or loans.

Instructions

1

Research your state laws to find out whether you can freeze your report. Each state has its own requirements and fees payable to the credit bureaus.

2

Gather your personal information, including a list of your addresses for the past five years, your Social Security number, proof of your current address and a photocopy of ID such as a driver's license or birth certificate. Make three copies of all documents.

3

Write a cover letter to each credit bureau stating that you would like to freeze your credit report.

4

Place a cover letter, a copy of your documents and a money order (if state law requires a fee) in each of 3 manila envelopes.

5

Mail each packet, posted certified mail, to the following addresses:

Experian Security Freeze
P.O. Box 9554, Allen, TX
75013

Equifax Security Freeze
P.O. Box 105788, Atlanta, GA
30348

TransUnion, Fraud Victim Assistance Department
P.O. Box 6790, Fullerton, CA
92834

6

Allow 30 days to receive confirmation from the credit bureaus that they have frozen your credit reports. You also should receive a unique personal identification number (PIN) that you will need when you wish to unfreeze your reports.

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How a Credit Bureau Functions

Information

There are three major credit bureaus--Experian, TransUnion and Equifax--and all three gather information on consumers when they get a loan or credit card, or use credit in some other way. Companies such as Visa and MasterCard issuers, banks that make loans, cell phone carriers and others all report your account and payment history to the three credit bureaus each month.

Consumer Files

Using the information passed along by credit issuers, the credit bureaus put together a file on each consumer. They create the file by compiling all of the information into a format that is simple to read and interpret. All of the accounts are summarized in that one file.

Categories

Credit bureaus provide other information, above and beyond credit accounts and payments. It falls into four categories, the first of which is identifying data such as name, home address, telephone number, Social Security number, date of birth and employment history. The second is credit accounts and repayment history. The third contains public court records including bankruptcies and tax liens. The fourth lists any inquiries made by potential creditors and others who recently requested a copy of the report.

Access

According to the Solve Your Problems website, access to your credit report is only given out by the bureaus under certain circumstances. You can give prospective creditors and potential landlords and employers permission to get your report. It can also be viewed by potential insurers and agencies evaluating your eligibility for certain governmental benefits. You are also entitled to one free copy of your report from each of the three credit bureaus annually. Anyone who obtains an illegal copy of your credit report may face a year in jail.

Limitations

A credit bureau functions under the limitations of the Fair Credit Reporting Act. The act spells out how bureaus can gather and use data and the process under which you can dispute incorrect information. If you find any wrong entries on your credit report, you can dispute it in writing. If the credit bureau cannot confirm its accuracy, it must be removed from your report.

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