Question

A business regularly extends credit to customers for large purchases with a standard interest rate of 5 percent. There is also a $200 installment fee that is added to the total cost of the purchase. A customer applies for credit but has a very low credit score. If the business decides to extend credit, which is most likely?

Answer 1

It is most likely that the business will approve the credit application, but may adjust the interest rate to account for the customer's low credit score. The business may also require a larger down payment or impose stricter repayment terms in order to mitigate the higher risk associated with lending to someone with a low credit score.