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What is a tier 2 credit score

tier 2 credit score

A tier 2 credit score is a score that falls within the range of 670 and 799. Higher credit scores would be categorized within the first credit tier while scores below 670 would fall under the third credit tier. 

A credit tier is a way of organizing consumers and their credit scores. The most common ways of organizing credit scores are in credit tiers or ranges.

Your credit score is a three-digit number that represents your financial habits and behavior. Most lenders use credit scores, among other factors, to determine if borrowers are qualified for the financial products they offer. Credit scores can vary widely from person to person, but it’s common for people to have  tier 1 or tier 2 credit. 

When looking for loans or lines of credit, it’s essential to know and understand your credit score so you apply for the appropriate products. Here, you will learn more about your FICO score, how to identify your credit score tier, and how to achieve top-tier credit if that is your financial goal. 

What Is a Credit Tier?

When it comes to credit tiers, there are four, with tier four being the lowest and tier one being the highest tier. Here is a breakdown of the credit tiers: 

  • Tier 1: 800 – 850
  • Tier 2: 799 – 670
  • Tier 3: 669 – 300
  • Tier 4: beginning score of 300.

When it comes to credit ranges, scores are broken down even more specifically. Organizing credit score ranges would look like this: 

  • Exceptional: 800 – 850
  • Very Good: 740 – 799
  • Good: 670 – 739 
  • Fair: 580 – 669
  • Poor: 300 – 579

Credit Tier 2: A Breakdown

AspectDetails for Tier 2 Credit 
Credit Utilization RatioIdeal Range: 30-40%. Keeping credit card balances low relative to credit limits can positively impact tier 2 credit.
Average Age of Credit Recommended: 5+ years. A longer credit history typically indicates more experience in managing credit.
Credit Inquiries Limit to 1-2 per year. Minimizing hard inquiries can prevent temporary drops in the credit score.
Account Diversity Mix of credit types (credit cards, mortgage, auto loans, etc.) is beneficial but should be managed wisely.
Debt-to-Income RatioAim for below 36%. A lower ratio indicates better financial health and can influence credit decisions.
Payment HistoryOn-time payments are crucial. Even one late payment can significantly impact a tier 2 credit.
Credit Score Fluctuations Expect minor fluctuations. Regular monitoring is key to understanding these changes and maintaining a good score.
Impact of Co-Signing Co-signing a loan can affect your score. Ensure timely payments on the co-signed account to avoid negative impacts.
Credit Score Recovery After negative events (like late payments), recovery to a stable score can take several months, depending on severity.
Credit Counseling Seeking advice from credit counseling services can be beneficial for strategic improvements in credit management.
Disclaimer: This data table is for informational purposes only and should not be taken as financial advice. Individual circumstances and lender policies may vary, so it’s recommended to seek personalized advice from a financial professional. The information provided does not guarantee any specific credit score improvements or financial outcomes.

What Is Considered a Good Credit Score?

Credit scores are set between a range of 850 to 300. 300 is the credit score borrowers typically start out with. As people open and use financial accounts such as bank accounts, loan accounts, or credit card accounts, their credit score will either go up or down depending on their behavior. 

Having a perfect or excellent credit score would put you at a score somewhere around the 800s. However, don’t be discouraged if your score isn’t flawless; having a score in the 700s or upper 600s is still considered good. 

How To Raise Tier 2 Credit 

Want to try and raise your credit score to a higher tier? If this is your goal, it’s important to understand the factors that go into determining your credit score. Credit bureaus will look at the following categories when compiling your credit report and credit score:  

  • Payment history (35%)
  • Amounts owed (30%)
  • Length of credit history (15%)
  • Recent hard credit inquiries (10%)
  • Credit mix (10%)

By making positive changes in each of these financial categories, you should start to see a significant improvement in your credit score over time. Check out the tips below to begin your journey towards tier 1 credit! 

Make Your Payments on Time 

Making payments on time is a must if you want to raise your credit score. History of payments makes up 35% of a borrower’s credit score, which makes it the most influential factor that contributes to credit. To make sure you are making payments on time, set up reminders in your phone or on your calendar. You can also sign up for autopay to ensure you are making on-time payments each month. 

Pay More if Possible When Paying Off Debt

As you make your monthly debt payments on time, consider paying more than just the minimum amount due. With most forms of debt, lenders will charge an interest rate based on the amount a borrower owes. The less your balance is, the less you may pay in interest rates. So, by paying more towards your debt each month, you can end up saving money and paying off your debt faster!  

Avoid Applying for New Loans or Credit Cards

Each time you apply for a loan or credit card, your credit score takes a small hit. While you may see your score only drop five points or so with each credit inquiry, these can add up quickly. Avoid an unnecessary decline in your credit by only submitting credit applications when it is absolutely necessary. Before you apply for funding, ask yourself the following: 

  • Do you have enough money in a savings account to cover your expenses?
  • Can you organize your budget and spend more responsibly to make room in your finances? 
  • Do you have a trusted friend or family member who would be willing to lend you money interest-free? 
  • Would you be willing to get a part-time job or have a garage sale to earn the money you need for your expenses?

What Kinds of Loans Are Available With Tier 2 Credit?

What types of financial products are available to borrowers with a tier 2 credit score? Check out some of the most common loan types for people with mid-range credit below. 

Credit Cards

Many credit card companies offer financing to individuals of all credit types. However, the interest rates and credit limits you may qualify for will vary depending on your credit. The higher your score, the more funding and lower rates you are likely to receive. 

Personal Installment Loans

Personal installment loans are one of the most versatile funding types available. The credit score you need for personal loan approval depends on a few different factors. For example, if you have a reliable source of income, you may receive approval for a higher loan amount even if you have less than perfect credit. 

Auto Loans

Auto loans are a type of funding that helps pay for a new car. Like credit cards, the credit limit and interest rate you receive on an auto loan will depend on credit. 

Payday Loans

Payday loans are a type of short-term financing. Financial emergencies often leave people of all credit types thinking, “I need a payday loan immediately.” However, this may not be the best choice. While payday loans are quick and easy, they can also be extremely inconvenient and leave the borrower feeling financially overwhelmed. 

Benefits of Having Better Credit Scores

Why are high credit scores so great anyway? Check out the benefits you can enjoy when you work on building your credit! 

More Loan Products To Pick From 

The higher your credit score, the more financial products you will have access to. Borrowers with lower scores may only have access to bad credit loans or notoriously unreliable funding like payday loans. As your credit goes up, you’ll find more funding opportunities you are qualified for! 

Higher Funding Amounts 

One of the best advantages of boosting your credit score is being qualified for higher loan amounts. Borrowers with high credit are typically considered low risk, so lenders feel more comfortable extending higher funding amounts. 

Favorable Loan Terms 

Another great perk of having a high credit score is the opportunity to receive more favorable loan terms. When your loan terms are designed with you in mind, you won’t have to worry and stress each month when it’s time to make your payment! 

Lower Interest Rates 

One of the most impactful aspects of a loan is the interest rate. Interest rates can play a big role in determining how long a borrower will take to pay back a loan, as well as how much they will end up paying for their funding overall. 

Borrowers who have a higher credit score are typically rewarded by receiving lower interest rates on a loan. If you already have a loan from before you started improving your credit score, you may be able to refinance for a better rate in the future.   

How Often Should I Check My Credit Report?

Consumers are entitled to one free copy of their credit report from each of the major credit bureaus at least once a year. But, you may want to check your credit reports more often than once a year, especially if you are working toward improving your score. According to Lexington Law, 27% of adults say they check their credit score on a monthly basis.1

You can usually access your FICO score and unofficial credit report for free whenever you like via an online bank or credit card account. While these free reports are technically unofficial, they still contain virtually the same information lenders, and financial institutions receive when they request an official report. 

FAQ: Credit Tier 2

What is the average FICO score for someone in the tier 2 credit range?

The average FICO score in the tier 2 range typically falls between 670 and 739. This range is considered “Good” and reflects a solid credit history without major defaults.

How do tier 2 credit scores impact auto loan approvals and terms?

With a tier 2 credit score, consumers can generally secure car loans, but the terms might not be as favorable as those offered to tier 1 borrowers. Auto lenders may offer a higher interest rate or require a larger down payment.

Can improving my credit history help me boost my credit tier?

Yes, enhancing your credit history, especially by making timely payments and reducing debt, can improve your FICO score over time, potentially boosting your credit tier.

How do the three major credit bureaus affect my tier 2 credit?

The three big credit bureaus (Equifax, Experian, and TransUnion) compile and maintain your credit reports, which are used to calculate your FICO score. Discrepancies among these bureaus can affect your score, so it’s important to ensure all reports are accurate.

What’s the difference in credit reporting for tier 2 scores compared to the best credit scores?

Credit reporting is similar across all tiers, but those with the best credit scores typically have a history of timely payments, low credit utilization, and a diverse mix of credit types without significant negative marks.

Is it advisable to apply for car loans from multiple lenders if I have a tier 2 credit score?

While shopping around can help you find better rates, applying to multiple lenders can lead to several hard inquiries on your credit report. This could temporarily lower your score, so it’s best to do thorough research before applying.

How does a tier 2 credit score affect the monthly payment on an auto loan?

A tier 2 credit score may result in higher interest rates for car loans, which can increase the monthly payment amount. However, the exact impact varies based on the loan amount and term.

Do different scoring models affect my classification in tier 2?

Yes, different scoring models, like VantageScore and various FICO score versions, can yield slightly different scores. However, most lenders use FICO scores, and the tier 2 classification generally remains consistent across models.

What strategies can I use to improve my tier 2 credit score to get better loan terms?

Focus on paying bills on time, reducing outstanding debts, and avoiding new credit inquiries. Regularly monitoring your credit report for errors and maintaining a diverse mix of credit accounts also helps. Know consistency is key. If you are wondering why your credit score is not going up, but you are practicing all the right habits, you may just need to give it time. 

How long does it typically take to move from a tier 2 to a higher credit score tier?

The time it takes can vary greatly depending on individual financial situations and efforts. Consistently positive financial behavior, like timely payments and debt reduction, over several months to a few years can lead to significant improvements.

A Word From CreditNinja on Tier 2 Credit Scores

Having a tier 2 credit score means you are doing just fine financially, but there is room for improvement. By making slight adjustments to your spending habits and behaviors, you could see yourself achieving top tier credit in just several months! 

While CreditNinja encourages you to limit your loan inquiries while you are working on building credit, sometimes financial emergencies come up. If you are looking for a quick loan to help make ends meet, but don’t have the best credit yet, consider a personal installment loan from CreditNinja. CreditNinja specializes in bad credit loans and has been helping consumers get affordable funding since 2018. Check out our easy online application to see how much cash you could get today!*

References:
1. 30 Credit Score Statistics for 2023 | Lexington Law
2. What Are the Different Credit Score Ranges? | Experian
3. What is Tier 1 Credit? | Experian

* Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications approved before 10:30 a.m. CT Monday – Friday are generally funded the same business day. Applications approved after this time are generally funded the next business day. Some applications may require additional verification, in which case, the loan if approved, will be funded the business day after such additional verification is completed.

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