Sometimes, raising your credit score a bit has no effect on your interest rate, because lenders often rely on credit scoring brackets to set rates. Lenders typically establish four or five tiers, but some include an extra one for those with elite scores, called tier plus one. If your credit score falls into this tier, you always get the best rates and terms.
Identification
What scores fall under "tier one plus" depends on the lender or provider, because creditors themselves decide what rate to give borrowers. Most of the time, tier one or tier one plus scores are those greater than 760. When credit scores get this high, the probability of the borrower default is much less than 1 percent.
Benefits
Only people in the "tier plus one" range get the best possible rate offered by the lender. The benefits of just a few tenths of a percent from getting into the elite tier are best seen on large loans with a long life. Just 1 percent on a mortgage with a $1,000 monthly payment, for example, would save tens of thousands of dollars over the course of a 30-year loan. Non-debt-related providers, such as insurers and cellphone carriers, can also give you discounts for having a very high credit score.
Considerations
In 2010, lending standards are at their tightest in years, so a 760 may not cut it if you want to guarantee the best possible rate on all of your loans. To truly enter the elite, you must have a score higher than 800 -- something achieved by only 5.7 percent of all borrowers, according to Mint.com.
Tip
To gain an elite credit score requires not just paying bills on time, but also carefully managing your credit. To max out your variety of loans, for example, you should have two revolving accounts -- usually credit cards -- for every installment loan. You also need to get new credit while minimizing inquiries by adding your name to an account in good standing. Consumers should put at least a small amount of purchases on credit cards, but keep the amount of the limit they use to well below 35 percent.
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ReplyDeleteIf you are wondering, what is a good credit score, the answer can be as simple as a single number or more complicated. There are many credit scoring systems used in the United States. The Fair Isaac credit score scale or the FICO score is commonly used, but there are others.read more-What is a good credit score?
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ReplyDeleteDo you know awhat is good credit score?That leaves credit scores within the range of 650 to 750 as those that can be considered a good credit score.read more-What is a good credit score?
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