 TITLE: Why Do Higher Credit Scores Mean Better Interest Rates? CONTENT: How Your Credit Score Determines Your Interest Rates\n----------------------------------------------------\nYour credit score and credit report give lenders a window into your past behavior, but they're also viewed as a predictor of your future behavior.\nIf someone has excellent credit, it's likely because they've made responsible financial decisions such as repaying bills on time, keeping debt low and having accounts in good standing over a long period of time. Because lenders can be more confident someone with a higher credit score will repay the debt in full and on time, they usually charge these borrowers a lower interest rate.\nWhen a lender is sure it'll get its money back, it doesn't feel the need to guarantee returns with a high interest rate. When you're applying for a mortgage, a high credit score may also help you qualify for a lower down payment. Again, because you're lower risk in the lender's eyes, it may decide you don't need to provide as much upfront to guarantee the loan.\nWhen someone has less-than-stellar credit, it might be due to missed or late payments, high amounts of debt, or negative marks such as bankruptcy or accounts in collections. A lower score and negative items on a credit report make a borrower appear riskier to a lender. If someone has struggled to pay debts on time or at all, the lender will have concerns that this person might not be able to repay the debt they're applying for.\nA low credit score could also mean someone is brand new to credit and hasn't yet established a positive payment track record. A borrower who doesn't have much of a credit history is more of an unknown and, without a track record that proves their ability to repay, a lender likely won't be as comfortable extending them credit. If a lender does decide to approve someone with lower credit scores, they will often give them a higher interest rate to mitigate risk. END