What Is Tier One Credit Rating?

Tier one credit is one of the highest rankings issued by the nation's credit-rating services. Applied to customers with an average FICO score of 770 or above, excellent credit allows the holder access to lower interest loans, cheaper car insurance and more opportunities.

Function

A top credit score can open many doors for a consumer, as well as save them money on interest and fees. A tier one rating offers many perks. Excellent credit holders can obtain low-interest loans with favorable terms, for instance. Ever see those car commercials that speak about "well-qualified buyers"? Chances are, the commercial is speaking about a tier one scorer. Credit tiers are commonly used when negotiating car lease or loan terms. Excellent credit is seen as a positive indicator of the ability to pay obligations on time and live within one's means. It is also seen as a mark of personal responsibility and wise financial stewardship. Tier one credit holders are prime consumers who are sought after for their dependability.

Types

Tier one credit has different meanings across various credit rating services. For example, Fair Isaac considers its highest tier a credit score of 700 or above. Mortgage lender Freddie Mac rates 770 or above FICO scores with an A+. SmartMoney.com and PBS's "Frontline" show reports 770 or above as excellent. Some creditors also have a "tier 0," which qualifies the holder for the absolute lowest rates. However, it's seldom used, because there is such a small percentage of tier 0 holders.

Benefits

Having high credit brings many benefits, not the least of which are discounts and savings on loans. It can also land you a job. According to Tony Bowers on the site TechRepublic, "The use of credit checks by U.S. employers considering job candidate has increased 55 percent over the past five years." Companies are now using credit scores to rate integrity and honesty, stating that those qualities cannot be adequately represented in a job interview, application or resume. Tier one credit holders are also more likely to land financing for homes in affluent areas or exclusive properties that filter out those with good to middling histories. For good or ill, many with good credit are held in higher esteem than those who have made mistakes.

Geography

According to a USA Today article, credit scores seem to be stratified along geographic and racial lines. For instance, the Missouri Department of Insurance "found [that] the typical borrower in minority neighborhoods had low credit scores in the 18th percentile, where the 50th percentile marks the middle. By contrast, consumers in non-minority areas had better average scores in the 57th percentile." Hispanics and young people were found to have less or no credit history more often than whites. High credit seems to be concentrated in certain populations and age groups, although this is changing as minority groups become more financially mobile.

Potential

Tier one credit holders have almost limitless access to credit, so there's little that they can't obtain. However, with increased credit comes increased risk. Excellent credit holders know that a key to keeping a good credit score is on-time payment of debts and a good debt-to-income ratio. As long as financial commitments are met, there are many opportunities to use the increased mobility to grow personal fortunes and invest for the future.