Question

Explain the effect of credit history on the terms of a loan.
a)A positive credit history will mean a higher interest rate.
b)More information is needed.
c)A negative credit history will mean a lower interest rate.
d)A positive credit history will mean a lower interest rate.

Answer 1

d) A positive credit history will mean a lower interest rate.

Having a positive credit history indicates to lenders that the borrower is reliable and trustworthy when it comes to repaying loans. As a result, lenders are more likely to offer lower interest rates to individuals with a good credit history, as they pose less of a risk of defaulting on the loan. On the other hand, individuals with a negative credit history are considered higher risk borrowers and are likely to be offered higher interest rates on loans.