Tier 1 credit is the highest level of credit for automobile financing, meaning buyers with Tier 1 credit get the best interest rates, lower monthly payments and better loan terms, according to Autobytel. As of September 2014, most FICO credit scores between 600 and 800 are Tier 1 credit numbers, also accounting for credit history, payment history and creditor reports.
To put this in perspective, Edmunds.com explains that Tier 1 credit was for FICO scores at 720 and above as of May 2013. Average bank rates were as low as 3.22 percent with no down payment. Credit unions offered lower interest rates between 2.79 percent and 2.97 percent. Shorter-term loans at 36 months had better interest rates, and longer-term loans at 60 months featured higher interest rates. The car rating company explained these lower rates spurred competition among lending companies and car loans to help jumpstart the auto industry.
Tier 2 credit was, on average, for credit scores between 700 and 719. Tier 2 financing had an interest rate near 3.34 percent for banks. Tier 3 credit, for FICO scores of 670 to 699, offered bank interest rates around 4.86 percent with a 10 percent down payment, according to Edmunds.com. Tier 4, the lowest credit level for scores between 630 and 669, featured average interest rates of 6.44 percent and a 15 percent down payment as of May 2013.