BANKING AFFAIRS

Detailed explanation-1: -Since credit is effectively a measure of how trustworthy you are as a borrower, the interest rates for people with no credit or bad credit are typically higher. Lenders use higher interest rates as a way to protect themselves when the people they lend to can’t pay.

Detailed explanation-2: -If a bank thinks you are more likely to default on a loan, it wants to charge you a higher interest rate so it can recoup more of the cost of that loan early on. The better your credit score, the better risk you are for a bank or other financial institution.

Detailed explanation-3: -“Your credit score is one factor that can affect your interest rate, ” according to the CFPB. “In general, consumers with higher credit scores receive lower interest rates than consumers with lower credit scores.”

Detailed explanation-4: -Common causes of a bad credit rating include failing to stick to your credit agreement, paying the bare minimum on your credit card each month, and falling victim to identity theft.