Credit is when a lender trusts and provides a consumer with money or resources on the basis that they will not be paid immediately, but on agreed terms at a later date. Tiers of credit are determined by credit scores, which are calculated by lenders and creditors based on information from a consumer’s credit report. They are based on individual credit history and determine how likely a consumer is to be approved for credit. They are also used to determine terms of borrowing, interest rates and borrowing limits. The tiers of credit are Tier 1, Tier 2, Tier 3 and bad scores. What is Tier 1 Credit? Tier 1 credit is considered the best, carrying the highest credit scores for borrowers with excellent credit reports and low risk for lenders. Tier 2 is for borrowers with good scores while tier 3 is for fair credit scores.
What does Tier 1 Credit mean?
Tier 1 credit means a borrower has a high credit score and presents a lower risk to lenders and creditors. What is considered tier 1 credit? When a consumer achieves Tier 1 credit, they enjoy benefits from lenders such as higher credit limits and lower interest rates. Being the best tier, the consumers in this tier gain favour with lenders and creditors and enjoy the best terms. This could lead to saving a lot of money during the lifespan of the loan. Lower credit tiers present a higher risk to creditors. They are often subjected to higher interest rates, stiffer terms and conditions and lower borrowing limits. Usually a risk-based pricing notice is sent to those in these tiers to have them make a decision based on the terms offered.
What credit score do I need for tier 1 credit?
A credit score is a 3-digit value calculated from a credit consumer’s credit reports that contain information on their borrowing and payment history. This score is used to evaluate the risk and creditworthiness of a borrower. The globally used FICO Score usually ranges from 300 to 850. The higher the score the better the credit and the lower the risk for lenders. Different creditors use different levels along this chart to determine tier levels. What is a Tier 1 credit score? FICO groups its excellent Tier 1 scores within 800 to 850. Other lenders may start at 700 or 750. To earn Tier 1 status a borrower has to make sure their credit score is as high as possible to surpass the diversity in lenders grouping levels. This should however not dissuade borrowers from always trying to improve their credit scores as higher credit scores earn them more benefits and save them a lot of money in the long run. Credit scores can be improved by adopting and maintaining a high level of creditworthiness. This includes making payments on bills on time and maintaining a high payment performance. Borrowers who get credit for making utility payments on time also receive positive feedback on their credit reports fast building their credit scores. Borrowers should also keep low debt balances and pay off their debts to maintain lo credit utilization ratios. It is also advisable to avoid opening new credit accounts but advisable to keep open unused credit cards. Often checking and disputing inaccuracies in your credit report helps maintain high credit scores.
How to get Tier 1 Credit
To get Tier 1 credit you have to improve your credit score and put effort toward gaining excellent credit reports. This is achieved by paying your bills on time to build an impeccable payment history. This is used to calculate your credit score that determines your credit tier. It is not easy paying debts. When you have a high credit utilization ratio, higher than 30%, as a result of large balances on your credit cards, lenders find it hard to give credit. Consumers should try paying off their debt to reduce debt load. This is not easy and may require budgeting towards payments. It is also advised to avoid opening many new credit accounts when attempting to make major purchases. Frequent applications result in inquiries into your credit reports that result in a lower credit score. It is good to often check and monitor your credit reports to make sure there are no inaccuracies and incorrect accounts listed on them. By maintain a good credit report over time, your credit score will rise towards the much coveted tier 1 status.
“What is tier 1 credit score?” This is an excellent credit score. The quest for excellence is never easy. It may seem difficult but the reality is it is highly achievable and the benefits far outweigh the struggle.