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R9 chargeoff account and Credit Rating - The Bills.com Blog
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R9 chargeoff account and Credit Rating
Question: When shopping for a car I was told that I have an R9 from old credit card. The card was canceled over a $25 late fee from 1.5 years ago (which is now $125 from interest). I spoke with the credit card company several times back in 2006 and was told that The charge would be pulled off my bill. I have been going in circles between thecredit company and the collection agency today to try and dispute the charges. My credit has taken a large dip because of the R9. My quesion is: Would it make any difference (to my credit score) by just paying the collection company? Or would the R9 still be there?
Answer: Thank you for visiting Bills.com. Here is an answer to your Credit question: If you pay the R9 account, the record of the delinquency will still remain on your credit report!
An "R9" status (frequently called a charge-off) is a credit report status that represents a trade-line that is severely delinquent (more than 6 months behind) and is a 'ding' on your credit report. If it is inaccurate and you pay the account off, the trade-line will simply say closed or paid in full, but the history of delinquency will remain.
If the account is indeed inaccurate, you should contest the accuracy of the report directly with the three primary credit bureaus and petition to have it removed.
According to the Fair Credit Reporting Act, all trade lines can be reported on each of the credit bureaus. However, the reporting agencies must update and keep accurate data in their credit files. If there is erroneous information (like a collection account, that you believe is inaccurate), you must notify them (typically through a certified letter) and then wait one reporting cycle (90 days) for the errors to be removed.
There are three major credit bureaus that offer credit reports, if there is something that you want added or removed, you should contact them directly:
Equifax
1-800-685-1111
www.equifax.com
Experian
1-888-397-3742
www.experian.com
Trans Union
1-800-916-8800
www.transunion.com
Since you are asking about credit updates, you might also be interested in how your credit score is calculated. Your credit rating is calculated based on several variables, including: your payment history (do you have any late payments, charge-offs, etc.), the amount and type of debt that you owe, if you have maxed out any of your trade lines, and then several other
secondary factors like the length of your credit history and how many recent inquiries have been made to look at your credit history. Paying off delinquent or maxed out trade-lines will almost always help your credit score.
There are five key factors that go into calculating your credit score, with certain items carrying more weight than others. These factors are as follows:
1) Payment history, which counts for approximately 35% of your score, is the most heavily weighted factor used in calculating your credit score. Consistently paying your bills on time has a positive influence on your score, while late or missed payments will hurt you in this area. If you have delinquent payments, the older the delinquency the less the negative impact on your score will be. Collection accounts and bankruptcy filings are also taken into consideration when analyzing your payment history.
2) Total debt and total available credit, which counts for about 30%. This section looks at how much debt you have compared to the total available credit on your accounts. If all of your accounts are maxed out, you will be considered a poor credit risk, because it appears that you are struggling to pay off the debt you have already incurred. If your account balances are relatively low compared to your available credit, this part of the risk analysis should help your overall credit score. The score calculation also looks at these two factors independently. Having too much available credit, whether you have used it or not, could hurt your credit score, as statistical studies have shown that people with excessive amounts of available credit are a higher credit risk. Unfortunately, the bureaus do not define exactly what they consider excessive, so best tip is to use credit conservatively and to keep your debt to credit limit ratio low.
3) Length of positive credit history, which counts for about 15%. The longer you maintain accounts in good standing, the better your score will be. This shows that you are able to make a long-term commitment to a creditor and are consistently responsible about making your payments.
4) Mix of types of credit, which counts for approximately 10%. Having several different types of credit,
such a credit cards, consumer loans, and secured debt, will have a positive influence on your credit score. Having too much of one type of credit can have a negative impact.
5) The number of new credit applications you have recently completed, which accounts for about 10% of your score. Applying for too much new credit in a short time period makes indicates that you could be credit risk, as you may be desperately trying to keep your head above water. The models make an exception for people who are shopping around for a loan, so if you are simply applying to see who can give you the best rate on a new loan, you need not worry too much about damaging your credit score.
While you cannot realistically calculate your own credit score, you can review your credit report for on the five factors I named above to get an idea of whether the accounts listed on your credit report are hurting or helping your credit score. You can then take action to improve any potential problems, such as paying down your balances or paying off collection items.
Also, factors such as age, sex, income, and length of employment, have no direct affect on your credit score, and are not considered when the bureaus calculate your score. Keep in mind that for most lenders, your credit score is only one aspect, albeit an important one, of your overall ?credit worthiness,? meaning the creditor?s view of your ability to repay a loan. Your income, for example, is not considered in the calculation of your FICO score, but most lenders will ask you what you earn to analyze your ability to repay the loan. Even if you have an 800 FICO score, if your income is only $10,000/year, a lender will probably not loan you a large sum of money, because despite your past credit habits as measured by your FICO score, the lender can see that you probably cannot afford to repay the loan.
If you would like to learn more about credit reports, credit scoring, and what it means to you, I encourage you to explore the wealth of material offered by Bills.com at http://www.bills.com/credit/
We hope that this helped you to Find, Learn, and Save!
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Also, make sure to get a free financial health check-up with Bills IQ!
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1. Posted by Gary Cooper on Wednesday 9th April 2008 11:02
Is there a way to keep my account from going r9 while negotiating a settlement? I'm currently in a consolidation program where I stop paying the creditors directly and save the money that I would be paying into a savings account. I do not have enough saved to make a good settlement offer, but would doing something like sending $20 a month keep them from taking it that far?
2. Posted by bob sanders on Wednesday 9th April 2008 15:35
It sounds like you are enrolled into a debt settlement program. In this type of debt resolution setup, you don't pay anything to your creditors (and your accounts go delinquent and almost certainly will charge-off or pass the R9 status) while you save up for a reduced balance settlement. If you are making a monthly payment and remaining current, then you will never be able to qualify for a settlement... but in that case if you can afford to make your payments and if by chance you do not have a financial hardship then a settlement program isn't really right for you anyway. If you just make a token amount that is less than your required minimum payment, then the account is still considered delinquent and will likely chargeoff. Essentially, in a debt settlement program the benefit is the low payment and the savings; but the cost is the credit impact and the collection issues. Good luck.
3. Posted by Patti Miller on Thursday 1st May 2008 11:27
My son has a credit card account that was in arrears. He made payment arrangements with the credit card company and has been making those payments. Yesterday he received a call from the credit card company stating that the payments he was making were insufficient and that his account had been put, or would be put, into R9 delinquency. They said they were sorry that the person who set up the payment arrangement was incorrect but there was nothing he could do, period. Do you have any suggestions? Thank you.
4. Posted by Bill on Thursday 1st May 2008 16:47
I hope your son had written confirmation of the said payment arrangement, if not, then he should try and talk to them and let them know that given his financial condition, he can only afford so much. As for the delinquency, unless he pays the arrears, it is going to hurt his credit.
5. Posted by Robin on Monday 4th August 2008 16:56
I paid off a charged off account that had a R9 status. Will the R9 status change or do I need to contact the company?
6. Posted by SakaTim on Tuesday 5th August 2008 09:04
An R9 status essentially means that a revolving account went to chargeoff. R1, R2, R3, R4, etc. all of the way to R9. It does not mean that it necessarily is CURRENTLY in chargeoff. What you need to do is to send the pay-off notice to the 3 bureaus requesting them to remove the chargeoff status, but unfortunately it might not come off since the listing of an R9 was accurate and you might have to wait the 7 years until the paid off account falls off of your credit report.
7. Posted by mk on Thursday 7th August 2008 20:17
I have an R9 rating on my credit report with a $0 balance, how long does it take it to be removed from the report
8. Posted by Enjay on Friday 8th August 2008 09:46
It will take upto 7 years from the date of the delinquency, for that account to fall off of your credit report. This is according to the Fair Credit Reporting act, you can check it here (on page 23): http://www.ftc.gov/os/statutes/031224fcra.pdf
9. Posted by pb on Tuesday 2nd September 2008 03:12
I've been threatened with an R9. Even though I've repeatdly told them I intend to pay the account ASAP. How do I best handle this?
10. Posted by Bill on Tuesday 2nd September 2008 08:56
An account getting charged off happens automatically after 180 days of non payments. This is not something that the creditors can threaten to do so at their will. Keep making some payment at least, that way the account will not get pushed to charge off status.