Question

A rating of how an applicant has handled credit. Scores close to 800 indicate excellent credit and result in favorable terms. Those around 600 or below indicate poor credit and result in higher interest rates, higher down payments, or rejection of credit applications. (FICO is an acronym for Fair Isaac Corporation, a California data analytics firm.)

a) APR
b) FICO
c) LTV
d) PMI

Answer 1

The described term is 'FICO,' which represents a credit scoring system that lenders use to evaluate an applicant's creditworthiness. Having a high FICO score can lead to better loan terms, while a lower score could increase borrowing costs or lead to credit application rejections. The correct option is b.

Step-by-step explanation:

The question is asking for the term that describes a rating of how an applicant has handled credit, with scores near 800 indicating excellent credit and scores around 600 or below indicating poor credit. The correct answer from the options given is FICO, which stands for Fair Isaac Corporation.

This scoring system is used by lenders to assess an individual's creditworthiness based on past and present financial behavior, such as payment history on loans and credit cards, as well as the consideration of factors like savings and investments.

FICO scores are an essential component when banks determine the interest rates and terms of credit.

A lower FICO score could lead to higher interest rates or even rejection of credit applications, while a high score could result in more favorable terms. It is also important to note that these decisions are on factual financial history, and personal factors like race, gender, or religion are not taken into account. The correct option is b.