Accounting Fundamentals Certification (AFC) Practice Test

A lower credit score indicates a higher risk profile for lenders, as it suggests that the borrower may have a history of late payments, defaults, or higher debt levels. Because of this increased risk, lenders often respond by offering higher interest rates on loans, including mortgages. This increase in interest rates compensates the lender for taking on the additional risk associated with lending to someone with a lower credit score. As a result, this can significantly affect the total cost of the mortgage over time, leading to increased monthly payments and greater overall interest paid throughout the life of the loan.

The other options do not directly correlate with the implications of a lower credit score; for example, a faster application process or lower down payment requirements are typically not tied to low credit scores, and loan terms generally depend on other factors rather than the borrower's credit score alone.