The scoring system
Most credit bureaus use the code "R" for a "revolving credit" such as a line of credit, or "I" for consumer credit such as a car loan. In addition, a number is assigned to each item on your credit report.
Credit score codes to remember:
R0 - Too new to rate; approved but not used.
R1 - Pays within 30 days
R2 - Pays within 30 to 60 days
R3 - Pays within 60 to 90 days
R4 - Pays within 90 to 120 days
R5 - Account is at least 120 days overdue, but is not yet rated "9"
R7 - Making regular payments through a special arrangement (debt consolidation) or other arrangement to settle debts (proposed by client or lender)
R8 - Repossession
R9 - Bad debt, placed in collection, moved without giving a new address or bankruptcy
The higher your score, the better your credit. The better your credit, the greater your options and types of credit you can get access to, such as a mortgage. Hence the importance of keeping your credit in good standing.
It is important to do an annual verification of your credit information to make sure there haven't been any errors. You can check your credit history on the Equifax web site free of charge.