- 1 tier 1 credit score range
- 2 What Is a Tier 1 Credit in Auto Loans?
- 3 Q: How to Tip the Scale of Credit in Your Favor?
tier 1 credit score range
Where Are You On The Credit Score Range?
There is a range used to define credit scores that the credit bureaus use. The score can be between 300 and around 850. The Fair Isaac Corporation uses the same type of scoring system.
The range is quite diverse. You will want to have a higher number such as 700-800 so that you can obtain credit easily. If you have a very low score such as 300, you will have a great deal of difficulty obtaining credit.
However, take this information with a grain of salt. The score does not provide the entire picture. Most creditors look at a multitude of variables before making a decision about credit worthiness.
If you have a good credit score of about 700 or higher you are considered an excellent risk and will most likely be granted credit with very low interest rates.
Even if you have a score in the 600 range, you should not have any trouble obtaining credit. You should not have to pay high interest rates for a loan.
The range of 600 to 680 is considered average. The majority of people across the country have this range. You will most likely obtain credit approval but may have stricter rules and standards for the loan.
A low credit score is a bit more complicated. If you have a score below 600, you certainly can get a loan but at a higher interest rate. There are certainly lending institutions that will offer you loans, but they will be on their terms. You may feel like they have all the power, and actually they do because they can deny you credit.
If you have a very low score you may have some trouble obtaining credit but, you will most likely find a lending institution that will lend you money, or give you credit, for a price. A very high price! You may think, is it worth it?
It may not be. You may want to wait and save your money rather than borrowing from them. Or, you may want to improve your credit by borrowing from them and paying them back right away, so you do not end up paying high interest charges.
Or, you may want to pay more than what the monthly requirement is. The credit card company mostly likely will keep track of the payments you make and will hopefully take notice when you pay more than just the minimum requested. You want to show them you deserve more credit since you voluntarily pay more than you would have to and that you are a good credit risk.
Some people say that credit cards are a necessary evil because you never know when you may have an emergency and not have any money.
What Is a Tier 1 Credit in Auto Loans?
When you go to borrow money to buy a car, the lender will check your credit and get your three-digit credit score. The credit score looks at everything on your credit report and summarizes it into a single number. Higher numbers indicate a better credit history, and lower numbers indicate the opposite. Some lenders group borrowers into tiers based on their credit scores, with tier 1 or A being one of the highest categories.
The exact definition of tier 1 can vary from one financing company to another and can change over time. However, to qualify for tier 1 credit, you will generally need a strong score. A good rule of thumb is that to get into Tier 1, your FICO credit score -- so named because it was developed by the Fair Isaac Corporation -- needs to be at least 700. Tier 1 credit can also be called A credit or platinum credit.
Some lenders track clients with especially strong credit. To qualify for this special tier, you typically need a FICO score above 740. Depending on the lender, it could be called 0 tier, 1+ tier or A+ credit. Other lenders refer to it as diamond tier. A+ customers typically qualify for the best financing offers, such as zero-down loans or automaker promotional financing with no interest.
You may still be able to get a car loan even if you don't have Tier 1 credit. Tier 2 lenders typically focus on borrowers with scores between 660 and 699. Tier 3 customers have scores that fall between 620 and 659 or between 581 and 659, depending on the lender. People on the lower D and E/F tiers or 4 and 5 tiers may also be able to qualify for loans, but they are typically considered subprime and can bear high interest rates.
The higher your tier, the lower your interest rate. As your credit gets stronger, you become a better risk for the lender, and it asks for less interest as compensation for letting you use its money to buy a car. For instance, according to MyFICO, a borrower with a 730 credit score -- tier 1 -- could expect to get a 60-month loan for 3.445 percent as of the date of publication. The same loan for a borrower with a tier 2 score of 670 could cost 7.035 percent, and a tier 3 customer with a 640 score could pay 11.074 percent. Customers with scores in the low 500s can expect to pay 17.307 percent in loan interest.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.
Experts agree what a good credit score is – is a score 720 or above (noting there is very little need to raise a score above that). Experts say good-to-great credit is 760 or above. A credit score score of 680 range is still considered good (noting if you need credit, you’ll probably get it. It just may not be at a desirable interest rate).
- 720+ is typically a Good Score.
- 800+ is typically a Great Score.
- 650+ is typically minimum credit for loan.
Question: What is a Good Credit Score?
Understanding credit scores is requires understanding how the credit scoring works. Credit scoring gives creditors 3 digit numbers that are calculated according to a mathematical formula with the information in your credit report and how it compares to millions of other people’s credit. The credit score number predicts how likely, or unlikely, it is that you will pay your bills. The better a good credit score number is, the higher likelihood you’ll be accepted for the loan and at a lower interest rate.
There are three different credit scoring models most often used by lenders to decide whether or not to extend an individual credit, but the most commonly used credit score is the FICO score.
Q: What’s the Range of Credit Scores?
60% Of Scores Are Over 700
A good credit score range is between 700 and 850. FICO credit scores range between 300 and 850.The general American public credit scores fall on a bell-shaped curve, with most people having credit scores that fall in the center, as follows:
Credit Scores From Different Credit Reporting Agencies
- There are three credit bureaus which keep information on file about your financial history and activity: Equifax, Experian, and TransUnion. Lenders contact one or more of the credit reporting agencies when deciding whether to extend you credit, to get your credit score and copy of your credit report. While the scores from each credit bureau may be slightly different and have different names, they are all developed with software from Fair Isaac, the developer of the FICO score.
- Credit Bureau FICO Score
- Equifax BEACON Score
- TransUnion EMPIRICA Score
- Experian /Fair Isaac Risk Model
Q: How to Tip the Scale of Credit in Your Favor?
Different activities carry different weight in the calculation of your credit score. Here’s the break down of your score:
The most important consideration in the formula for credit score calculation is how you pay your bills. Your credit score considers how you have paid your bills over time, but your most recent activity is more important than years gone past. If you pay your bills late frequently, you’ll have a lower credit score than someone who pays their bills on time.
Debt and Available Credit: 30%
The second most important consideration in credit score calculation is how much money you owe in comparison to how much credit is available to you. This is your debt to credit ratio, and if you have used all of the credit available to you, lenders consider you riskier than someone who has managed their money better and kept their debt low in relation to how much they could be spending. A good rule of thumb is to keep your debt within 30% of your total available credit for the highest credit scores.
How Long You Have Had Credit: 15%
The longer you have had credit, the better your credit score. This is because lenders have a longer period of time to review your payment habits.
What Types of Credit You Have: 10%
Credit scores are higher for individuals who have a mix of different credit types than for people who have just credit cards, for example. Having an installment loan, a credit card, a mortgage and a car loan is considered a good mix of credit and shows you can manage a variety of credit types.
Frequency of Credit Applications: 10%
If you are filling out applications for credit cards and loans every other day, you’re going to have a lower credit score than someone who isn’t applying for credit. This is because applying for credit frequently makes creditors wonder if you’re in some sort of financial emergency and need access to money – so the more you apply for credit, the lower your credit score will be.
Credit Score Range: Good Credit Score Ratings
- 499 or Less (2% of Population) Horrible
- 500-549 (5% of Population) Worst
- 550-599 (8% of Population) Bad
- 600-649 (12% of Population) Poor
- 650-699 (15% of Population) Okay
- 700-749 (18% of Population) Good
- 750-799 (27% of Population) Excellent
- 800 or more (13% of Population) Best
550 Credit Score and Below : You’re considered an “at-risk” buyer, and while it’s not impossible to get credit, interest rates can exceed 10 percent.
551-560 Credit Score : Not considered “good” credit. People that fall into this category should work to raise it so they can qualify for loans at lower interest rates. Often times, with a score this low, they’ll need a co-signer.
561-570 Credit Score : It’s still going to be tough to get approved for a mortgage or a car loan at reasonable interest rates, if at all, with this score.
571-580 Credit Score : This is still a bad credit score that has lenders perceiving you as an at-risk client, putting in jeopardy what you may qualify for.
581-590 Credit Score : A score in this range is evident of a poor credit history, which is a turn-off for many lenders.
591-600 Credit Score : Get your score up to 600 to become eligible for more types of loans and at lower interest rates. This is still borderline poor credit.
601-610 Credit Score : Most people have credit scores in the 600s or 700s, but until you get to that 620 threshold, you’re considered an “at-risk” client by many lenders.
611-620 Credit Score : A score below 620 hints at past credit problems, making it tough to get a low interest loan.
621-630 Credit Score : You’re above the 620 cutoff, which many lenders use as a line to determine whether or not to grant you approval.
631-640 Credit Score : According to the Wall Street Journal, this credit bracket will have you paying higher interest rates. For example, on a $150,000 30-year mortgage, people can expect to pay some $2,000 more in interest than someone with higher credit.
641-650 Credit Score : Focus on getting your score to 650 and beyond, as this will open the door to better interest rates.
651-660 Credit Score : Anything at or above 650 is considered a “good” score, able to qualify for reasonable interest rates.
661-670 Credit Score : You’ve improved upon your “good” score, now work on getting it to 700 to be eligible for better interest rates.
671-680 Credit Score : Again, while this score isn’t terrible, focus on building it up to 700. It’s considered the “new normal.”
681-690 Credit Score : A score of 700 is within sight. Focus on getting there to get better interest rates, as that’s what is becoming considered the “new normal.”
691-700 Credit Score : Not a terrible credit score, but worth your time to get it up to 700 or 720 to get the best interest rates on loans.
701-710 Credit Score : A score of 700 is the unofficial number in which you can qualify to get the best interest rates on a loan. You’re considered to have a good credit standing once you hit 700, which helps establish you as a qualified buyer.
711-720 Credit Score : To qualify for the best interest rates on a loan or credit card, you want to have a score north of 700, according to the New York Times. A score in this range helps solidify it.
721-730 Credit Score : CBS News says a score of 720 or above is the best number to have and unnecessary to try to raise any higher. At this number, you’re viewed as a minimal risk and can snag loans at low rates.
731-740 Credit Score : You’re beyond the 720 mark, and while it won’t hurt to raise your score higher, it’s not necessary under most circumstances.
741-750 Credit Score : While it won’t hurt to raise your score higher, it’s not necessary under most circumstances.
751-760 Credit Score : Again, you’re beyond the 720 mark, meaning that you’re already eligible for good interest rates on any credit you’re taking out.
761-770 Credit Score : If you’re credit is entering the high 700s. It shows you’re a very trustworthy client.
781-790 Credit Score : You’ve eclipsed the 720 mark and while getting a higher score won’t hurt you, it likely won’t help you much either.
791-800 Credit Score : If you’re bordering on 800, you’re in terrific credit shape. This score is proof that you’ve always been on time with any payments (bills, loans, etc) and don’t have a lot of credit taken out.
801-810 Credit Score : Anything 800 or over is exceptional credit, yet people with this good of credit typically won’t qualify for any lesser interest rates than those with 720.
821-830 Credit Score : You’re 100 points above the 720 cutoff mark, and while it doesn’t hurt to go higher, it’s not necessary. You currently have “excellent credit.”
831-840 Credit Score : Again, a great credit score, but unnecessary seeing as how this is often grouped into the 720 and above category.
841-850 Credit Score : An excellent credit score, but most lenders will still be pegging you in the “720 category” as a preferred customer.
How Credit Scores Affect Your Interest Rates
Not only does the credit score help a lender decide whether or not to approve your application for credit, but it also plays an important role in how much interest you pay on the money you borrow. The following is an example of how your FICO score might affect mortgage interest rates, but keep in mind each lender has it’s own credit tiers and interest rates:
Credit Score Scale for Sample Credit Interest Rate
If a lender is offering their best rates to borrowers with a score of 760 or better, and your credit score is 758 – those two points can cost you thousands of dollars in interest over the life of the loan.
You Can Raise Your Score in as Little as 4 to 6 Months By Following These Two principles:
- You Can Quickly Raise Your Score By Paying Down Balances (some experts believe to keep your balance about fifty-percent of max limit)
- Another Way to Boost Your Score is to Pay On Time (which will have the biggest impact)
Other Tips on Raising a Credit Score:
- Some experts think paying more than the minimum credit card payment can actually help by causing your month-to-month debt not grow.
Once you know what your credit score is, you may decide you need to increase it. There are a number of steps you can take to improve your credit score, but many will require patience as the score doesn’t increase over night when you implement these steps:
Pay Your Bills On Time – the most effective way to increase your credit score over time is to consistently pay your bills before they’re due.
Pay Down Debt – if you currently have debt, focus on paying it down or paying it off completely. As you reduce the amount of debt you owe, you will increase your available credit in relation to what you owe – which is a factor in calculating your credit score. The lower your debt in relation to the amount of credit available to you, the higher your credit score will become.
Correct Mistakes – it’s a good idea to review your credit reports from each of the three major credit reporting agencies (TransUnion, Equifax and Experian) annually to make sure there are no errors. You can get a free report once each year from each of the agencies. If you find any errors, make sure to follow the instructions of the credit reporting agency to have them corrected.
Don’t Apply for Additional Credit – while you are working on increasing your credit score, avoid applying for new sources of credit. Each time you apply for credit, it counts as an “inquiry” and will decrease your score.
Good credit scores for credit cards start at 620 for approval, but better interest rates and credit cards are offered to people who have credit scores above 720 (Credit Score Needed for Credit Cards). If you are unable to qualify for a credit card, you can consider a secured credit card for people with low credit scores. Secured credit cards require that you put a deposit down as collateral, but the credit card company will report your on-time payments to the credit bureaus which makes it possible to use the secured card to start increasing your credit score.
Each lender has their own set of criteria for what is considered a good credit score. The range of credit scores that are considered good enough for various types of credit will change based on the condition of the economy, too, so the score that was considered “good” two years ago may not still be considered “good”, today. View our other articles on credit scores: Good Credit Score to Buy a House, Credit Score Needed for a FHA Loan and Good Credit Score for a Car Loan.
With all types of lending, the lower your credit score, the higher your interest rate will be. It’s always in your best interest to improve your credit score as much as possible to get the best rates and qualify for credit.
A good credit score for buying a car is generally in the 700 range, although you can probably qualify for higher interest car loans with scores above 620.
You will probably need a 730 or higher credit score needed to buy a house and qualify for a traditional mortgage program, but there are often specialty mortgage programs for individuals with credit scores as low as 650.