 TITLE: What Is Tier 1 Credit? CONTENT: What Does Tier 1 Credit Mean?\n-----------------------------\nLenders designate credit tiers as part of what's called risk-based pricing. Using criteria such as credit score, current debts and income, they employ this method to determine what interest rates and terms they'll offer a particular borrower. Borrowers who are most likely to repay their debt—and thus present the least risk to the lender—are offered the lowest interest rates and best terms. These borrowers fall into the lender's tier 1 credit range.\nBorrowers who present more risk to the lender will fall into lower credit tiers and will pay higher interest rates and possibly additional fees on a loan or credit card. When a borrower's application is approved but they receive less-favorable terms due to information on their credit report, the lender is required by law to send them a risk-based pricing notice. The lender provides this notice verbally, electronically or in writing after they've determined the rates and fees on a loan but before the borrower has accepted them. After viewing the notice, the borrower can decide whether to accept the loan under the terms offered. END