What is a potential consequence of having a low credit score?

A low credit score can significantly impact an individual's financial life, one of the most notable consequences being increased interest rates on loans. Lenders use credit scores as a way to assess the risk of lending money to borrowers. A lower credit score indicates to lenders that a borrower may be a higher risk, which leads them to charge higher interest rates to mitigate that risk. This can result in borrowers paying more over the life of a loan compared to someone with a higher credit score, where they would qualify for more favorable rates.

The other options do not align with the typical outcomes associated with low credit scores. Government grants are generally not affected by credit scores, loan approval rates tend to be lower for those with poor credit, and insurance premiums may not be lower; in fact, many insurance companies use credit scores to determine rates, with lower scores often resulting in higher premiums.