Categories
Loans

What is Tier 1 Credit?

We will discus what is tier 1 credit and how different credit scores are determined. We will also tell you about how lenders assess your creditworthiness and how to improve your credit score.

When discussing credit scores, there is a numerical range that most creditors use to rank borrowers. Moreover, the numerical range of credit scores is typically between 300 to 850. Specifically, a score of 300 is the lowest score and 850 is the highest credit score. Otherwise, if you have no credit history than you will not have a score. The FICO Credit Scoring model is the most common scoring system used by lenders.

What is Tier 1 Credit and Do I have it?

When answering the question, “what is tier 1 credit?” it is impossible to say what a tier 1 credit score is. Each lender determines what is tier 1 credit differently. Obviously, if you have a credit score of 850, you have tier 1 credit. In fact, it is a safe bet that if you are above the 800 mark then you likely are a tier 1 candidate.

The advantage of determining what is tier 1 credit is that if you are rated tier 1, you may quality for the most competitive interest rates on loans. In fact, lenders prefer to lend money to those with higher credit scores. Furthermore, those with higher credit scores tend to pay back their loans at higher rates.

There are lower tiers of credit as well. Below tier 1 credit is tier 2. Below tier 2 credit is tier 3, and so on. Tier 2 and tier 3 credit scoring is much like tier 1. Moreover, each lender rates lenders on a different scale, so there’s really no consistency between lenders.

Where do Credit Scores Come From?

While pondering what is tier 1 credit, it is important to know where credit scores come from. Namely, there are three primary credit bureaus that track credit information. The credit bureaus are Equifax, Experian and TransUnion. Consequently, these credit bureaus consolidate your credit information, such as each debt you have and the amount of money you owe. As a result, lenders use one or more of these credit bureaus to determine whether to lend money to borrowers.

How to Improve Your Credit Score

So, you have figured out what is tier 1 credit. Now you want to achieve tier 1 credit. Accordingly, there are several things you should know about credit scores. First, you should know that the search for what is tier 1 credit, it takes time to build good credit. Getting good credit can take many years. In addition, achieving an 800 or greater credit score typically takes many years.

Here are some tips for how to improve your credit along the way.

Establish Credit History

Unfortunately, to have credit you must establish credit. When you have little or no money and you are just starting out, most lenders don’t want to lend to you. However, there are some options for you to consider. Specifically, here are some suggestions to get started building credit.

Get Started Building Credit with Small Debt like Credit Cards or Borrowing with a Cosigner

First, to start establishing a credit history you can have a friend or family member cosign a loan for you. Namely, a cosigner is someone who already has good credit and who will sign a lending contract with you. Moreover, the cosigner acts as a sort of backup or a supporter for you in the lending contract. Banks and lenders like cosigners because they have an established track record for borrowing. In addition, the lender will assess the cosigner’s credit prior to lending to you both. If, for some reason, you are unable to re-pay the loan to the lender, the cosigner is responsible for paying the remainder of the loan.

Second, you can apply for a credit card. Furthermore, many credit card companies will lend to those who have little or no credit history. Specifically, credit card companies are willing to take the risk of lending to new borrowers because the interest rates for these credit cards are typically pretty high. Of course, high credit card interest rates make lending very profitable for banks and credit card companies.

Although your first credit through a credit card or other debt will be minimal, you will have the opportunity to begin building your credit score. For example, your first debt will be like planting a seed; you must water it and take care of it for it to grow into something bigger.

Take on Healthy Levels of Debt

Most people know that when you borrow money, there is a limit to how much you can borrow. Moreover, lenders make the decision to lend to a borrower based on credit score, credit history earning power (income) and debt-to-income ratio. However, one little secret that many people don’t know is that not only can you have too much debt, but you can also have too little debt!

When you are trying to achieve a tier 1 credit score, many creditors like to see that you have some debt. In addition, creditors want to see that you are consistently making payments towards that debt. The financial industry has the expectation that most people will carry debt. People buy homes, cars and even have credit card debt. However, if you pay your debt off two quickly, it may hurt your credit score.

Maintain Revolving Credit

When considering what is tier 1 credit paying off debt may be your goal. As such, this is an admirable goal. However, consider that your credit score may go down if you pay off all your debt. In contrast, one option for you when debt is paid is to maintain revolving credit. For example, you can use a credit card each month for purchases. Furthermore, you can use the credit card to pay for normal expenses like groceries and gas. Then, at the end of each month, pay the balance owed. As a result, your credit report should respond positively to consistent, timely payments. And you will have the satisfaction of knowing you are staying debt free.

Pay Bills Consistently

As stated before, when you are trying to achieve what is tier 1 credit, you will need to consistently pay down debt over the length of the loan. For example, if you have a car payment set up for 60 months, then be sure to pay at least the minimum payment on time each month for the majority of the loan. Furthermore, don’t miss payments and be consistent. Finally, if you decide to pay off your loan a little early, that is ok too.

Monitor Your Credit Score

Throughout the process of mastering what is tier 1 credit you must monitor your personal credit score. There are businesses and credit cards that will provide this information for free. Moreover, there are also companies that specialize in monitoring and protecting your credit. In addition, the Federal Trade Commission (a government agency that regulated credit) can help you obtain resources for monitoring your credit.

A Word of Warning

There are Inherent Risks with Borrowing and Debt Must be Repaid

It’s important to understand the potential repercussions of getting quick cash loans without a bank account. In fact, borrowing money is always risky business, whether it’s through a credit card, loan or line of credit. Sometimes accepting the money seems harmless. Furthermore, you may be exacerbating your financial problems by taking on more debt. In short, heed the warning that debt must be paid back, including interest on a time schedule.

In addition, understand that getting quick cash loans without a bank account can place pressure on your assets with liens or other legal instruments. Consequently, in the event that you are unable to make your payments, the lender can take your asset, such as a home or car. When you borrow more money, you also take on more financial risk and stress.

Questions to Ask Before Borrowing

There are some important questions that you should answer prior to getting quick cash loans without a bank account. For example, questions you should have a solid answer for include:

  • What will I use the money for?
  • Do I need one lump sum or an available credit line?
  • What is the purpose of my loan?
  • Does fixed or variable interest matter?
  • How will I pay back the money?
  • Is there a chance that my income will change in the future?

Read More:

10 Things to Know Before Starting a Budget

Debt Elimination

How Much Was a Dollar Worth in 1960?

The Best Budget App

Buyer’s Guide for Used Cars

Disclaimer: It is important to note that Piggy Bank Coins does not provide financial advice. We do not endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals, and some equities.

In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, to help you make the best choice for you.