Credit Card Credit rating, at a specific point in time, is an assessment of one’s financial health and credit worthiness. It indicates the risk one might represent for lenders in comparison to other consumers. It tells the lender the probability of one being able to pay back a loan. In recent years, Credit Card Credit rating is used as a tool to process applications for credit cards, decide interest rates, fix credit limits, etc. A poor credit rating indicates a high risk for the creditor, and hence leads to high interest rates or sometimes even the refusal of a credit card application.
These ratings are determined in different ways in each country. Some of the factors that might influence credit rating are:
Payment history – Delay in payment of bills over 30 days can cause a bad credit rating.
Control of debt - Creditors want to make sure that consumers are not living beyond their means. Experts say that non-mortgage credit payments should not exceed more than 15 percent of the borrower's income after tax, each month.
Signs of stability and responsibility - Permanence in the borrower's home and job are perceived as signs of stability
Spending patterns, saving patterns, interest, amount of credit used are some of the other factors that influence credit rating. A creditor checks a customer's credit files occasionally.
Different personal rating systems exist in different parts of the world. Credit bureaus assign credit scores for individuals. Credit rating agencies assign Credit Card Credit ratings for several credit card firms. In Canada, TransUnion, Equifax, and Northern Credit Bureaus/ Experian are the main credit bureaus for individuals.
What does your credit rating mean?
"R" indicates you have "revolving" credit, where regular payments are made depending on the balance of your account, and you can then borrow more money within your credit limit. This includes credit cards.
R0 It means the user is too new to be given a rating or the card is issued but not in use yet.
R1 R1 means the customer repays the loan within 30 days of due date or does not have any payment past the due date
R2 It indicates the customer repays the loan in more than 30 days and less than 60 days or has not more than two payments past due date.
R3 A credit rating of R3 means the customer repays the loan in more than 60 days and less than 90 days or has not more than three payments past due date.
R4 It means the customer repays the loan in more than 90 days and less than 120 days or has not more than four payments past due date.
R5 Account is overdue by at least 120 days, but is not rated "9" yet.
R7 The customer makes regular payments through a special agreement.
R8 Repossession, i.e., voluntary or involuntary return of the merchandise.
R9 Indicates bad debt or bankruptcy or that the customer moved without informing authorities.
Banks consider one’s credit report deeply before approving any credit card or bank loan. One’s credit report speaks highly of the person. However, Capital One is one of the few credit card firms that still issue credit cards to a variety of customers. There are specialized cards for people with high credits and low credits.
