Credit Scores & Credit Monitoring What To Do About Bad Credit What Is Tier-One Credit? By LaToya Irby LaToya Irby LaToya Irby is a credit expert who has been covering credit and debt management for The Balance for more than a dozen years. She's been quoted in USA Today, The Chicago Tribune, and the Associated Press, and her work has been cited in several books. learn about our editorial policies Updated on April 15, 2022 Reviewed by Ebony J. Howard Reviewed by Ebony J. Howard Ebony Howard is a certified public accountant and a QuickBooks ProAdvisor tax expert. She has been in the accounting, audit, and tax profession for more than 13 years, working with individuals and a variety of companies in the health care, banking, and accounting industries. learn about our financial review board In This Article View All In This Article Definition and Examples of Tier-One Credit How Does Tier-One Credit Work? Benefits of Tier-One Credit How Do You Get Tier-One Credit? Photo: filadendron/Getty Images Definition Tier-one credit is a credit classification that auto-loan lenders often use to identify borrowers with the best credit. Key Takeaways Tier-one credit is the highest credit ranking, generally reserved for borrowers who have the highest credit scores.Borrowers who fall into tier one receive the most favorable loan terms including lower interest rates, the option for longer repayment terms, and lower down-payment requirements.You can work toward falling into tier one by having an excellent payment history, low credit card balances, and a long history of using credit. Definition and Examples of Tier-One Credit Tier-one credit describes borrowers with excellent credit. Tier-one borrowers are the most creditworthy because of their high credit scores and the likelihood they’ll repay their debts. Because consumers who earn tier-one status have high credit scores, they receive the best terms on credit cards, loans, and leases. The specific credit score ranges can vary depending on the lender. One lender may consider tier-one credit for consumers with credit scores above 730, while another may use 720 as the cutoff. Alternate Names: Tier A+ How Does Tier-One Credit Work? Tier-one credit is largely based on credit score, but other financial factors such as income, debt, and assets influence a tier rating. Generally, consumers with excellent credit fall into tier one because they have a lower risk of defaulting on a loan. Note Grouping borrowers into tiers allows creditors and lenders to easily determine interest rates, repayment terms, maximum loan amount, and special financing eligibility. The most desirable customers have tier-one credit, and lenders prefer to offer financing to customers who fall within this range. Those with tier-one credit will qualify for lower rates and longer repayment periods than borrowers who fall within lower tiers. Lenders may have different tiers and credit score ranges assigned to those tiers, but tier one always represents consumers with the best credit scores. Because the cutoff for tier one varies by lender, you might qualify for tier-one pricing with one lender but fall into tier two with another lender, even if they’re using the same credit score. If your credit score is in the high 700s and above, it's probably safe to assume you'd fall into tier one. However, credit scores in the low 700s could fall into tier two, depending on the lender. Benefits of Tier-One Credit Having tier-one credit comes with several advantages when you're applying for financing. More Financing Options Being a well-qualified borrower opens up the number of lenders who are willing to work with you and the loan terms they'll offer. You have the flexibility to shop around and choose the deal you like best. Note As long as you keep your loan shopping within a short time-frame, your credit score will treat all your loan applications as a single inquiry on your credit. This is important because inquiries are 10% of your credit score, and multiple inquiries that aren’t grouped together can drop your score multiple points. Save Money on Interest When Purchasing a Vehicle If you borrow $28,000 to purchase a car with excellent credit on a 60-month loan and no down payment, you'll pay $2,366.91 in interest over the life of the loan. By comparison, if your credit score is below 500, you'll pay $11,064.54 in interest over 60 months. Qualifying for tier-one financing would allow you to save $8,697.63 in interest cost. Monthly Payments Are More Affordable Your monthly payment on a 60-month $28,000 auto loan with a tier-one rate would be $506.12. By comparison, your payment would be $651.08 monthly if you borrow with a credit score under 500, or $144.96 more per month. If your car-buying decision hinges on the monthly loan payment amount, falling below tier one may cause you to choose a lower-priced vehicle or a longer repayment period. How Do You Get Tier-One Credit? People with tier-one credit typically make all their payments on time, have low or no credit card balances, and are, in general, responsible with their credit. This excellent credit profile doesn't happen overnight, though. If you aren’t applying for a car loan in the next few months, you may be able to raise your credit score enough to bump yourself up into a new tier using the following tips. Make All Your Monthly Payments on Time Payment history is the number-one factor in your credit score. To qualify for tier-one credit, aim to pay all your bills on time, and if you have to pay late, make sure you pay within 29 days of your due date. Note Late payments no longer affect your credit after seven years. If you have some old late payments that are near the seven-year mark, consider holding off on your loan application until the negative information no longer appears on your report. Keep Your Credit Card Balances Low Minimize the amount of credit card debt you carry. The lower your credit card balances are relative to your credit limit, the better your credit score will be. If you have high balances right now, focus on paying them down below 50% to raise your credit score. Keep Your Old Accounts Open A well-established credit history helps boost you to tier-one credit. Although you may be inclined to close old accounts you don’t use, keep those accounts active. Doing so increases the age of your credit, which accounts for 15% of your score. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. myFICO. "How Are FICO Scores Calculated?" Accessed May 26, 2021. myFICO. "How Are FICO Scores Calculated?" Accessed May 26, 2021. Equifax. "When Does a Late Credit Card Payment Show Up on Credit Reports?" Accessed May 26, 2021. Consumer Financial Protection Bureau. "How Long Does Negative Information Remain on My Credit Report?" Accessed May 26, 2021. OnDeck. "Don't Mess Up Your FICO Score: Manage Your Revolving Credit Usage." Accessed May 26, 2021. myFICO. "What Is the Length of Your Credit History?" Accessed May 26, 2021.