PrepTest 83, Section 2, Question 19
One of the things lenders do in evaluating the risk of a potential borrower defaulting on a loan is to consider the potential borrower's credit score. In general, the higher the credit score, the less the risk of default. Yet for mortgage loans, the proportion of defaults is much higher for borrowers with the highest credit scores than for other borrowers.
One of the things lenders do in evaluating the risk of a potential borrower defaulting on a loan is to consider the potential borrower's credit score. In general, the higher the credit score, the less the risk of default. Yet for mortgage loans, the proportion of defaults is much higher for borrowers with the highest credit scores than for other borrowers.
One of the things lenders do in evaluating the risk of a potential borrower defaulting on a loan is to consider the potential borrower's credit score. In general, the higher the credit score, the less the risk of default. Yet for mortgage loans, the proportion of defaults is much higher for borrowers with the highest credit scores than for other borrowers.
One of the things lenders do in evaluating the risk of a potential borrower defaulting on a loan is to consider the potential borrower's credit score. In general, the higher the credit score, the less the risk of default. Yet for mortgage loans, the proportion of defaults is much higher for borrowers with the highest credit scores than for other borrowers.
Which one of the following, if true, most helps to resolve the apparent discrepancy in the statements above?
Mortgage lenders are much less likely to consider risk factors other than credit score when evaluating borrowers with the highest credit scores.
Credit scores reported to mortgage lenders are based on collections of data that sometimes include errors or omit relevant information.
A potential borrower's credit score is based in part on the potential borrower's past history in paying off debts in full and on time.
For most consumers, a mortgage is a much larger loan than any other loan the consumer obtains.
Most potential borrowers have credit scores that are neither very low nor very high.
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