Question

question 19 · 1 point
given that pedro has a total debt of $34,630 and a total credit limit of $52,000, and that shaniqua has a total debt of $9,465 and a total credit limit of $16,000, who is more likely to have a lower credit score? justify your choice.
select the correct answer below:
shaniqua has a lower credit score because she has a higher debt - to - credit ratio.
pedro has a lower credit score because he has a lower debt - to - credit ratio.
pedro has a lower credit score because he has a higher debt - to - credit ratio.
shaniqua has a lower credit score because she has a lower debt - to - credit ratio.

Explanation:

Step1: Calculate Pedro's debt - to - credit ratio

The debt - to - credit ratio formula is \(\text{Ratio}=\frac{\text{Total Debt}}{\text{Total Credit Limit}}\).
For Pedro, \(\text{Ratio}_P=\frac{34630}{52000}= 0.666\) (rounded to three decimal places).

Step2: Calculate Shaniqua's debt - to - credit ratio

For Shaniqua, \(\text{Ratio}_S=\frac{9465}{16000}=0.592\) (rounded to three decimal places).

Step3: Compare the ratios and relate to credit score

A higher debt - to - credit ratio is associated with a lower credit score. Since \(0.666>0.592\) (i.e., \(\text{Ratio}_P>\text{Ratio}_S\)), Pedro has a higher debt - to - credit ratio.

Answer:

Pedro has a lower credit score because he has a higher debt - to - credit ratio.