What Is a Tier Two on a Credit Score?

A person with credit on a tier two level is in the credit rating majority. Your credit is not perfect but you can still qualify for a loan. In a different scenario, a business at a tier two level has an established credit history and is in a position to obtain financing from a vendor. In both cases, at the tier two credit level, you have opportunities. As a consumer you can shop around for the best rates and terms available to you. As a business you are paving the way to establish credit history for additional funding as your business grows.

Business Credit Profile

As a new business you may need credit from your vendors. Your first step at tier one is to set up accounts with vendors by selecting vendors who take the time to report payment history to your business credit profile. Tier two financing takes place after you have established accounts so that vendors who are willing to extend credit are able to pull a credit history on the business.

Tier Two Business Lending

The difference between tier one and tier two on a business credit tier system is that at tier two, a vendor may pull the company's credit score in order to obtain credit. Credit information may be available but with limited history. Once the credit is pulled at the tier two level, the vendor may extend credit from small loans with short term financing to credit lines over several years.

Consumer Profile

Tier two credit for a consumer is a step down from tier one in credit demographics. The profile of this consumer may have short term employment or have lived at their residence for only a short while, but has stability and the ability to pay. In 2010, the credit bureau risk score known as FICO established the level two tier as 700 to 759. The majority of consumers are in this category.

Effect

The FICO score is based on a scale of 300 to 850. A consumer's FICO score affects her interest rate and monthly payments. "Master Your Debt" by Jordan Goodman highlights one example: for a $25,000 car loan, a person on a tier two level would pay almost $100 less per month than a borrower with a credit score under 589. Over three years, the tier two borrower pays almost $3,600 less in payments than the person with the low credit score.