What Does Tier 1 Mean for a Consumer Credit Score?

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Consumer credit scores provide insight for lenders into individuals' ability to manage debt and personal finances effectively. Any and all debts you take on can potentially affect your credit score. Ranging from a low of 300 to a high of 850, your credit score can greatly affect your ability to secure automotive financing, mortgage loans, credit cards or in-store credit. To save time, debt issuers such as automotive finance companies classify credit scores into three or more tiers. A Tier 1 credit score represents the highest range of possible scores, while tier three represents the lowest range. Understanding what makes a credit score "TIer 1" as well as how to achieve Tier 1 status yourself can help you to manage your credit reputation more effectively.

Credit Score Tiers

Although the exact definition of tiers varies among different lenders, Tier 1 generally represents a score between 700 and 850. Tier 2 generally includes scores from 660 to 699, while Tier 4 includes scores below 660. Different lenders may alter their definitions, and may even add additional tiers to further classify and differentiate individuals' credit risk.

Credit Score Influences

A number of factors come into play to influence your credit score, ultimately impacting which tier your score falls within. Missed payments, defaults and settlements can all negatively impact a credit score and keep it below Tier 1. The ratio of available credit to total credit comes into play, as does the length of your credit history, the number of accounts you have open and the types of debt you have outstanding.

Credit Report Impacts

A credit report contains insightful information about exactly what is helping or hurting your credit score. Credit reports can reveal exactly how many debt accounts you have open, as well as any closed accounts that have not yet been reported as closed. They can show your ratio of available credit to total credit and reveal any reported late payments or defaults. Perhaps most importantly, your credit report can reveal erroneous reports that could damage your credit score and prevent you from earning the score you deserve.

Reaching Tier 1

Achieving a Tier 1 credit score requires patience, diligence, commitment and sometimes sacrifice, but the rewards can be well worth the time and effort required. Regularly checking your credit report and score is the first critical step, as it allows you to set relevant and timely goals for addressing specific concerns. To work your way toward Tier 1, always make debt payments on time, keep your credit balances low and limit the number of large installment loans and credit cards you have open at any time. If you're building credit for the first time, give yourself time to establish a Tier 1 track record. Even the best credit report won't reach a high score if it's too new, with little borrowing history.