Episode Transcript
[00:00:01] Speaker A: It's Tuesday. That means it's Take Control Tuesday. And I have Mansa Moussa from MoneySmartLife.org on the phone with me and Manta. We're on the same line talking about credit scores right now. But you told me that there are five tiers of credit scores. What are they and what does that mean?
[00:00:21] Speaker B: Right. So let's start at the low tiers. First tier, number five is poor credit. Now that's a score that ranges between 305. 79.
What's available to that tier is not a whole lot. Basically, when it comes to credit cards, only secure cards are available at that level. Secure card is where you put in money into the credit card account and that's your credit limit. So if you put in, give them $300, your credit limit is $300.
[00:00:58] Speaker A: Right.
[00:00:59] Speaker B: And when you have a credit score at that level, you're generally not going to be approved for any loans or anything like that. The lenders view this as very high risk.
They almost always require collateral.
So that's that level. The next level is level four. Now, this is fair credit. And the credit score There is between 580 and 669.
You can get, once again, the secure cards. A lot of times you can get retail store credit cards, which we don't recommend to people, but they're available.
You can get subprime credit cards. There will be companies like Capital One that will offer you credit cards, but they may come with annual fees and they always have a higher interest rate.
[00:01:52] Speaker A: Yep.
[00:01:53] Speaker B: They also generally have a lower credit limit, which can impact your score.
So the lenders view this as higher risk and offset the what they see as a risk with higher fees, lower limits, and those kind of things.
The third level is what is called good credit. That's between 670 and 739.
Now, when you get into this level, they start offering you reward cards, cash back, travel miles, those kind of things.
Now this is at an entry level. The lenders view this as moderate risk. They know that people in this area are likely to carry a balance or miss an occasional payment. So this is a very profitable segment for the credit card industry.
You miss payments, interest, late fees, those kind of things. That's direct profit to the industry.
[00:02:55] Speaker A: Right.
[00:02:55] Speaker B: Tier 2 is very good credit.
And this is where you start getting much better credit card offers.
[00:03:03] Speaker A: Right.
[00:03:04] Speaker B: When you start getting into the higher levels like we're talking about now, with very good credit, which is 740 to 799, the rewards that you're offered get better. There's some balance transfer cards available at this point that can be very advantageous to you. And you'll be approved for most loans that you apply for. So mortgages, car notes, those kind of things. You might not get the top tier rate, but you'll get very good rates. This is a very competitive credit score segment. So if you're in this segment, you get credit card offers. Look for the best ones.
Now the top tier, excellent credit is between 808 50. Now this is where you really start getting into the premium rewards cards. Travel rewards, airline miles, full rental car coverage.
[00:04:07] Speaker A: Wow.
[00:04:08] Speaker B: They didn't have to use your insurance. They will completely cover your insurance that comes with these credit cards. Now these are cards like American Express Platinum Chase Reserve. There's a lot of 0% interest offers in this tier credit cards. And they also offer high limits.
[00:04:30] Speaker A: Yes.
[00:04:30] Speaker B: Not that you have to run out and spend your card up to your limit.
[00:04:35] Speaker A: Please don't.
[00:04:35] Speaker B: As we talked, right.
We talked in the past, 30% of your credit score is based on your proportion of balance to limit. Now the lenders view of this low risk, high profitability and once again the way they compete for your business is by offering you lower interest rates and perks and points.
So those are the five tiers of credit score that once again you want to try to get as high credit score as possible so you could access credit cards that are a tool for you rather than a weapon against you.
[00:05:19] Speaker A: Absolutely. That's some really good information and it's also good for folks to be able to use this information to better their credit score.
[00:05:30] Speaker B: Absolutely. And they can go back to the archives and check out some of our past episodes where we've talked about how to move your credit score and those kinds of things.
[00:05:39] Speaker A: That's take control Tuesday.com and, and as always like share and get this information out to people because we can all use it. Manta, thank you.
[00:05:49] Speaker B: Thank you.
