Credit Tier Rating Explained

There are six main tiers in your FICO credit score. The Fair Isaac Corporation is the major producer of credit scores, according to Bankrate.com, and a person's FICO score is what most lenders use when making the final decision on a loan. A credit score tier is a credit score range. Different tiers affect the probability of getting a loan or credit card and the interest rate that comes with the loan or credit card.

Tier One

Tier one credit scores are generally regarded as scores that range from 760 to 850. Since credit scores deal with ranges and not specific scores, a FICO score of 760 is essentially the same as 850 and will get you the same rates as a score of 850, according to Bankrate.com. A score of 850 is more of a status symbol than anything else. Tier one credit scores qualify for the best interest rates possible, and are typically the only tier that qualifies for the "Special" interest rates of 0.0 percent for auto loans.

Tier Two

Tier Two credit scores range from 700 to 759. Any FICO score falling within the tier two range is still regarded as very good credit. Consumers with tier two credit scores will normally receive an interest rate that's a step down from the top interest rate. Anyone with a tier two credit score should have no problem qualifying for loans or credit cards.

Tier Three

Tier three credit scores range from 660 to 699. Having a credit score fall in the range of 660 to 699 means is indicative of good credit. Tier three FICO scores will generally have no problem qualifying for loans or credit cards, although they will not receive the best interest rate. For example, according to Bankrate.com, the average 30-year fixed mortgage interest rate on January 26, 2011 was 4.97 percent. Tier three credit scores would probably qualify for an average interest rate.

Tier Four

Scores that range from 620 to 659 qualify as tier four credit scores, also known as "Average" credit. Like the above tiers, tier four credit scores will usually qualify someone for loans and credit cards, but financial institutions take a much longer and in-depth look at the person's financial history.

Tier Five

A credit score that falls between 580 and 619 will place a person in the tier five credit score. People that have a credit score between 580 and 619 are considered "subprime" by lenders. Qualifying for a loan becomes difficult in the tier five range, and many lenders require either a co-signer or collateral before approving a loan for someone that has a tier five credit score. Interest rates will also jump up dramatically for anyone considered subprime. A person with a tier five credit score can expect to pay two or more percentage points higher than the average rate. Using Bankrate.com's January 26, 2011 national average 30-year fixed mortgage interest rate of 4.97 percent, a person with a tier five credit score will typically pay at least 6.97 percent or more.

Tier Six

According to Bankrate.com, tier six is the lowest tier that will qualify anyone for a mortgage rate. Tier six credit scores range from 500 to 579. People with a tier six credit score will qualify for the rock-bottom interest rate, if they qualify at all. Most banks will require collateral or a co-signer before approving any loans.