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Tier 1 credit is generally defined as a credit score of 750 or higher. The term is most commonly used among auto lenders, but other lenders use it as well. People with tier 1 credit have the highest level of creditworthiness and will usually receive the most favorable terms on loans and lines of credit. They are considered low-risk based on their credit history, income and debt, and they are the most likely people to repay debts when compared to the general population.
Different lenders calculate credit tiers differently. That means you could apply for a credit card, have your score pulled and determined to be tier 1, and receive the best terms possible, but on the same day apply for an auto loan and receive less favorable terms because your score ranked as tier 2. That doesn’t necessarily mean your score changed that day, the auto lender could just have stricter requirements.
Without knowing exactly how a lender determines tier 1 credit, if it even uses that terminology, it’s a good idea to look at the generally accepted credit score ranges. Credit scores range from 300 to 850 overall, with scores of 750 and up considered “excellent” – the highest tier. More lenient lenders might consider tier 1 any score of at least 640 – the start of “fair” credit. It just depends on the lender.
Checking your credit report and score regularly is an important step in understanding your creditworthiness and what you can do to maximize your chances of having tier 1 credit. For personalized credit improvement advice and free daily credit score updates, sign up for a free WalletHub account.
This answer was first published on 04/28/20 and it was last updated on 02/03/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
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FAQs
In such situations, Tier 1 is the top level, typically referring to a credit score of at least 700, or sometimes a minimum score as high as 750. Basically, this tier encompasses borrowers with the best credit scores.
What is considered a Tier 1 credit? ›
In such situations, Tier 1 is the top level, typically referring to a credit score of at least 700, or sometimes a minimum score as high as 750. Basically, this tier encompasses borrowers with the best credit scores.
What does Tier 1 mean for a loan? ›
Tier 1 can be defined as the highest level of credit, whereas tier 3 is the lowest. If you are fortunate enough to fall into the former category, you will only have to submit basic information when applying for a loan.
What does tier 2 credit mean? ›
The average FICO score in the tier 2 range typically falls between 670 and 739. This range is considered “Good” and reflects a solid credit history without major defaults.
What is a Tier 3 credit score? ›
Tier One – Considered exceptional credit, scores ranging from 800 – 850. Tier Two – Considered very good credit, scores ranging from 740 – 799. Tier Three – Considered good credit, scores ranging from 670 – 739. Tier Four – Considered fair/poor credit, scores ranging from 300 – 669.
What credit score do I need to get a $25,000 car loan? ›
In general, you'll need a FICO credit score of at least 600 to qualify for a traditional auto loan.
How many people have tier 1 credit? ›
Credit Score Range
And so, as you can see, tier 1 credit falls under the range between 800 to 850. Keep in mind that only about 1.6% of Americans have a perfect credit score, and so although getting a perfect credit is possible, it won't be realistic for everyone!
What is the meaning of Tier 1? ›
(1) See Tier 1 network. (2) The top level. A Tier 1 city is one of the major metropolitan areas in a country. A Tier 1 vendor is one of the largest and most well-known in its field. However, the term can sometimes refer to the bottom level or first floor.
What is Tier 1 in finance? ›
Tier 1 capital refers to the core capital held in a bank's reserves and is used to fund business activities for the bank's clients. It includes common stock, as well as disclosed reserves and certain other assets.
What is the difference between Tier 1 and Tier 2 debt? ›
Tier 1 capital is the primary funding source of the bank and consists of shareholders' equity and retained earnings. Tier 2 capital includes revaluation reserves, hybrid capital instruments and subordinated term debt, general loan-loss reserves, and undisclosed reserves.
Tier 2 Credit: Considered a very good credit score, scores ranging from 740 – 799. Tier 3 Credit: Considered good credit with scores typically ranging from 670 – 739. Tier 4 Credit: Considered fair or poor credit, with scores that can range from 300 – 669.
What tier is 700 credit score? ›
FICO credit scores, the industry standard for determining credit risk, range from 300 to 850 — with 670 to 739 considered a good score, 740 to 799 is very good and 800 to 850 is exceptional. A 700 score puts you in the middle of the good range but still slightly below the average credit score of 716.
What is a Tier 8 credit score? ›
Tier 8: An extremely poor score of 579 or below means you “have an extremely poor credit history or I have no credit history at all.”
What is tier 5 credit? ›
The FICO® Score ranges from 300 to 850 and is broken down into five tiers, or bands: Exceptional: 800-850. Very good: 740-799. Good: 670-739. Fair: 580-669.
What is tier 7 credit? ›
Tier 4 – 650-669, considered responsible. Tier 5 – 630-649, considered fair. Tier 6 – 610-629, considered poor. Tier 7 – 580-609, considered significantly poor. Tier 8 – 579 and below, considered extremely poor.
Is Tier 1 credit good? ›
While different lenders might have slight variations in their criteria, a Tier 1 credit score generally falls within the range of 800 to 850 on the FICO scale. This score range signifies excellent credit and reflects a history of responsible borrowing and timely repayments.
What does Tier 1 mean in business credit? ›
Tier 1: Basic Trade Credit
It typically refers to trade credit accounts, which are revolving tradelines from vendors that primarily offer products or services other than financing. An office supply company would be a good example. These accounts usually don't require a business credit check.
What is the difference between Tier 1 and Tier 2 lenders? ›
The main difference between a first-tier lender and a second-tier lender is the deposit amount they can accept for home loans. A Bank requires a much larger deposit than non Bank lenders – 20% for owner occupied or 35% for investment.
What is Tier 1 2 3 credit? ›
A typical Tier 2 range would be from about 660 up to that lender's Tier 1 level. And Tier 3 generally starts in the low 600s. The Tier 1/2/3 designations don't extend into the “subprime” borrowers with scores below 600, but we'll talk more about those as well. Photo by REDPIXEL - stock.adobe.com.
