Nate's credit score is 795 while Cole's credit score is 610. It is more likely that:

Question

Nate's credit score is 795 while Cole's credit score is 610.  It is more likely that:

BlackTom AI · Accepted Answer

Question restatement: Nate has a credit score of 795 and Cole has a score of 610. The prompt asks which outcome is more likely given these scores.

Option provided: 'Nate will be able to borrow at lower interest rates and pay lower insurance premiums than Cole.'

Analysis of the option: A higher credit score generally signals to lenders that the borrower is a lower credit risk. With a score of 795, Nate is perceived as more creditworthy compared to Cole’s 610, which typically translates into more favorable financing terms. Specifically, lenders tend to offer lower interest rates to higher-scoring borrowers because the probability of default is statistically lower. Insurance premiums can also be influenced by credit history, where better credit often correlates with lower premiums due to reduced risk for insurers. Therefore, the statement that Nate would access lower interest rates and lower premiums aligns with standard credit-scoring models and lending-pricing practices.

Considerations about alternative choices: If there were other options, we would assess them in light of how credit scores influence borrowing costs. For instance, any option suggesting equal or better terms for the lower-scoring individual would be inconsistent with conventional credit-scoring logic, and any option implying no impact of credit score on rates would also be inaccurate. In this case, since only one option is presented, the reasoning centers on the direct relationship between higher credit score and favorable loan and insurance pricing.

Conclusion context (without stating the answer): The core principle at play is that higher credit scores generally lead to lower financing costs and often lower insurance costs due to reduced estimated risk, which supports the presented option as the more likely outcome.

FIN 205 B Module 6 quiz: credit and lending

Nate's credit score is 795 while Cole's credit score is 610. It is more likely that:

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