Which statement about how credit scores influence loan terms is true?

• A. They have no impact on loan eligibility.
• B. They affect loan terms only for credit cards.
• C. They affect interest rates and loan approval.
• D. They determine the exact loan amount you can borrow.

Answer: (B)

Credit scores are a measure of borrower risk that lenders use to decide both whether to approve a loan and what interest rate to offer. A higher score signals lower risk, so lenders typically approve you more readily and quote lower interest rates with better terms. A lower score indicates higher risk, which can lead to higher rates or even denial. This effect spans many loan types, not just credit cards. The score doesn’t fix the exact amount you can borrow by itself—the amount is also shaped by income, existing debt, collateral, and other factors. So the true statement is that credit scores influence both interest rates and loan approval.