Question

what effect does a lower credit score have on buying power?
has no effect on buying power
increases buying power through access to more credit
decreases buying power due to higher interest rates
increases the total loan term

Explanation:

A lower credit score typically means lenders view the borrower as higher - risk. Higher interest rates are charged to compensate for this risk. When interest rates are higher, the cost of borrowing increases. For example, on a loan, a higher interest rate means higher monthly payments or a higher total amount repaid over the loan term. This makes it more difficult for the borrower to afford large - ticket purchases, thus decreasing their buying power. The option “has no effect on buying power” is incorrect as credit scores do impact lending terms. “Increases buying power through access to more credit” is wrong because a lower credit score usually leads to less access to credit or less favorable credit terms. “Increases the total loan term” is not a direct effect of a lower credit score on buying power; also, a longer loan term might not increase buying power and is not a typical result of a lower credit score in relation to buying power.

Answer:

C. decreases buying power due to higher interest rates (assuming the options are labeled A: has no effect on buying power, B: increases buying power through access to more credit, C: decreases buying power due to higher interest rates, D: increases the total loan term)