The lower your credit score, the ? your interest rate will be.

The lower your credit score, the ? your interest rate will be.

• A. Lower
• B. Higher
• C. Variable
• D. Stable

Answer: (B)

A lower credit score reflects a higher level of risk to lenders. When a borrower has a lower credit score, it suggests that they may have a history of late payments, defaults, or overall financial instability. As a result, lenders typically charge higher interest rates to compensate for the increased risk associated with lending to individuals who are more likely to miss payments or default on the loan. Higher interest rates are a way for lenders to protect themselves financially by ensuring that they can still make a profit even if some loans do not get repaid. Borrowers with higher credit scores are seen as more reliable and less risky, leading to lower interest rates being offered to them. Thus, as credit scores decrease, the costs of borrowing tend to increase, making the statement that a lower credit score leads to a higher interest rate accurate.

A lower credit score reflects a higher level of risk to lenders. When a borrower has a lower credit score, it suggests that they may have a history of late payments, defaults, or overall financial instability. As a result, lenders typically charge higher interest rates to compensate for the increased risk associated with lending to individuals who are more likely to miss payments or default on the loan.

Higher interest rates are a way for lenders to protect themselves financially by ensuring that they can still make a profit even if some loans do not get repaid. Borrowers with higher credit scores are seen as more reliable and less risky, leading to lower interest rates being offered to them. Thus, as credit scores decrease, the costs of borrowing tend to increase, making the statement that a lower credit score leads to a higher interest rate accurate.