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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
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 is Tier 1 credit quality? ›
Borrowers who are most likely to repay their debt—and thus present the least risk to the lender—are offered the lowest interest rates and best terms. These borrowers fall into the lender's tier 1 credit range.
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 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 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.
What is considered Tier 1 and Tier 2? ›
Tier 1 and tier 2 capital are two types of assets held by banks. Tier 1 capital is a bank's core capital, which it uses to function on a daily basis. Tier 2 capital is a bank's supplementary capital, which is held in reserve. Banks must hold certain percentages of different types of capital on hand.
What is the Tier 1 credit ratio? ›
The Tier 1 Capital Ratio is a financial institution's core capital divided by its risk-weighted assets (RWA). Regulators use it to ensure financial stability in the system by requiring financial institutions to have a ratio above a certain threshold. A higher ratio implies more safety.
What is the meaning of Tier 1? ›
(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 credit score is tier 2? ›
Tier 1: 800 – 850. Tier 2: 799 – 670. Tier 3: 669 – 300. Tier 4: beginning score of 300.
Your score falls within the range of scores, from 740 to 799, that is considered Very Good. A 777 FICO® Score is above the average credit score. Consumers in this range may qualify for better interest rates from lenders. 25% of all consumers have FICO® Scores in the Very Good range.
What is considered tier 2 credit? ›
Tier 1: 800 – 850. Tier 2: 799 – 670. Tier 3: 669 – 300. Tier 4: beginning score of 300.
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.
What is a Tier 2 credit card? ›
Tier two credit cards maintain no annual fees and usually tack on a basic rewards program in the form of cashback, airplane miles, or points. These usually have a credit limit of $500 to the low thousands. If you started with a student credit card, you might be able to simply upgrade that card to a no-annual-fee card.
