What does a lower credit score generally indicate about a borrower?

What does a lower credit score generally indicate about a borrower?

• A. They qualify for low-interest loans
• B. They are considered less risky to lenders
• C. They are viewed as more risky to lenders
• D. They have a high chance of obtaining credit

Answer: (C)

A lower credit score typically indicates that a borrower is viewed as more risky to lenders. Credit scores are calculated based on various factors, including payment history, the amount of debt owed, the length of credit history, and types of credit used. When a borrower has a low credit score, it suggests that they may have missed payments, accrued too much debt, or have a limited credit history, all of which signal to lenders that there is a higher likelihood of default on loans. Due to this perceived increased risk, lenders may be hesitant to extend credit to such borrowers, or they might impose higher interest rates and less favorable loan terms to mitigate the risk. Thus, having a lower credit score generally signifies potential difficulties in accessing credit and unfavorable borrowing conditions.

A lower credit score typically indicates that a borrower is viewed as more risky to lenders. Credit scores are calculated based on various factors, including payment history, the amount of debt owed, the length of credit history, and types of credit used. When a borrower has a low credit score, it suggests that they may have missed payments, accrued too much debt, or have a limited credit history, all of which signal to lenders that there is a higher likelihood of default on loans.

Due to this perceived increased risk, lenders may be hesitant to extend credit to such borrowers, or they might impose higher interest rates and less favorable loan terms to mitigate the risk. Thus, having a lower credit score generally signifies potential difficulties in accessing credit and unfavorable borrowing conditions.