The specific credit score ranges can vary depending on the lender. One lender may consider tier-one credit for consumers with credit scores above 730, while another may use 720 as the cutoff. Alternate Names: Tier A+
How Does Tier-One Credit Work?
Tier-one credit is largely based on credit score, but other financial factors such as income, debt, and assets influence a tier rating. Generally, consumers with excellent credit fall into tier one because they have a lower risk of defaulting on a loan. The most desirable customers have tier-one credit, and lenders prefer to offer financing to customers who fall within this range. Those with tier-one credit will qualify for lower rates and longer repayment periods than borrowers who fall within lower tiers. Lenders may have different tiers and credit score ranges assigned to those tiers, but tier one always represents consumers with the best credit scores. Because the cutoff for tier one varies by lender, you might qualify for tier-one pricing with one lender but fall into tier two with another lender, even if they’re using the same credit score. If your credit score is in the high 700s and above, it’s probably safe to assume you’d fall into tier one. However, credit scores in the low 700s could fall into tier two, depending on the lender.
Benefits of Tier-One Credit
Having tier-one credit comes with several advantages when you’re applying for financing.
More Financing Options
Being a well-qualified borrower opens up the number of lenders who are willing to work with you and the loan terms they’ll offer. You have the flexibility to shop around and choose the deal you like best.
Save Money on Interest When Purchasing a Vehicle
If you borrow $28,000 to purchase a car with excellent credit on a 60-month loan and no down payment, you’ll pay $2,366.91 in interest over the life of the loan. By comparison, if your credit score is below 500, you’ll pay $11,064.54 in interest over 60 months. Qualifying for tier-one financing would allow you to save $8,697.63 in interest cost.
Monthly Payments Are More Affordable
Your monthly payment on a 60-month $28,000 auto loan with a tier-one rate would be $506.12. By comparison, your payment would be $651.08 monthly if you borrow with a credit score under 500, or $144.96 more per month. If your car-buying decision hinges on the monthly loan payment amount, falling below tier one may cause you to choose a lower-priced vehicle or a longer repayment period.
How Do You Get Tier-One Credit?
People with tier-one credit typically make all their payments on time, have low or no credit card balances, and are, in general, responsible with their credit. This excellent credit profile doesn’t happen overnight, though. If you aren’t applying for a car loan in the next few months, you may be able to raise your credit score enough to bump yourself up into a new tier using the following tips.
Make All Your Monthly Payments on Time
Payment history is the number-one factor in your credit score. To qualify for tier-one credit, aim to pay all your bills on time, and if you have to pay late, make sure you pay within 29 days of your due date.
Keep Your Credit Card Balances Low
Minimize the amount of credit card debt you carry. The lower your credit card balances are relative to your credit limit, the better your credit score will be. If you have high balances right now, focus on paying them down below 50% to raise your credit score.
Keep Your Old Accounts Open
A well-established credit history helps boost you to tier-one credit. Although you may be inclined to close old accounts you don’t use, keep those accounts active. Doing so increases the age of your credit, which accounts for 15% of your score.
