What best explains the relationship between a borrower's credit score and a down payment requirement?

O Someone with a high credit score may be required to make a higher down payment.

O Someone with a high credit score may be required to make a lower down payment.

O Someone with a low credit score may be required to make a lower down payment.

O Someone with a low credit score may not have to make a down payment.

Question

Business

Alicia Stanton

21 February, 14:51

What best explains the relationship between a borrower's credit score and a down payment requirement?

O Someone with a high credit score may be required to make a higher down payment.

O Someone with a high credit score may be required to make a lower down payment.

O Someone with a low credit score may be required to make a lower down payment.

O Someone with a low credit score may not have to make a down payment.

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Answers (1)

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Savage · Answer 1

Someone with a high credit score may be required to make a lower down payment.

Explanation:

A high credit score is an indication of good borrowing and repayment culture by an individual. It shows the individual makes prompt repayments on their debts, and they hardly miss on installments. A borrower with a high credit score is labeled as creditworthy or a low-risk customer.

A low credit score arises when a customer has a bad history of debt repayment. They have either defaulted or tend to miss on installments. A borrower with low credit is considered high-risk and likely to default on payments.

A lender will demand a high deposit from a borrower with a low credit score to cover for the high-risk involved in the transaction. A borrower with a high credit score is a low-risk customer and does not need to offer a high deposit to access credit.