Many consumers spend time managing their credit scores, and with good reason if they plan to borrow money. People with the best credit scores usually receive the best interest rates on many different types of loans. Consumers, as well as lenders, artificially break down ranges of credit scores into different levels, or tiers, to make it simpler to grade a person's credit and determine his qualifications for a loan.
Definition
A top tier credit score is a range of scores considered prime or that represent the least risk of default or late payments. According to Craig Watts, consumer affairs manager with the Fair Isaac Corporation, a top tier credit score is anything better than the mid-700s. The highest FICO score possible is 850, so anything from 750 to 850 is considered top tier.
Variations by Lender
Banks determine individually if a person has top tier credit. Different types of loans have different cutoff points considered top tier. Unsecured loans and credit cards usually require a higher score to be top tier, with auto and home mortgage loans requiring a lower score due to the reduced risk of these loans. Other criteria figure into a person's credit worthiness, such as her income or how long she has been at her job, but have no impact on a person's FICO score.
Interest Rates
Banks and other lenders reserve their best interest rates for their top tier credit customers. Loans with higher interest rates may still be available for customers who fall into lower tiers. The lower the tier, the higher the interest rate.
Improving Credit Scores
A consumer can save significantly on mortgage and auto loan rates and even credit card interest rates by taking action to improve his credit scores. Making all payments on time over a long period of time is a leading factor in higher credit scores. In addition, keeping revolving account balances relatively low in relationship to the available credit has a large influence. Having a good mix of accounts and maintaining a low number of inquiries into your credit report help improve credit scores, but are less of a factor.
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