What typically happens to a consumer’s credit score if they consistently miss payments?

What typically happens to a consumer’s credit score if they consistently miss payments?

• A. It improves significantly
• B. It decreases
• C. It remains unchanged
• D. It increases slightly

Answer: (B)

When a consumer consistently misses payments, their credit score typically decreases. This decline occurs because payment history is a crucial component of the credit scoring model, often accounting for around 35% of the overall score. When payments are missed, it signals to lenders that the consumer may be financially irresponsible or struggling to manage debt, which can lead to a lower credit score. Additionally, missed payments can also result in other negative consequences, such as late fees and increased interest rates on existing debt. Over time, a consistently low credit score can limit access to better loan terms, higher credit limits, and can even affect rental applications or job opportunities where credit is a factor. Therefore, the correct answer illustrates the negative impact of missed payments on a consumer's creditworthiness.

When a consumer consistently misses payments, their credit score typically decreases. This decline occurs because payment history is a crucial component of the credit scoring model, often accounting for around 35% of the overall score. When payments are missed, it signals to lenders that the consumer may be financially irresponsible or struggling to manage debt, which can lead to a lower credit score.

Additionally, missed payments can also result in other negative consequences, such as late fees and increased interest rates on existing debt. Over time, a consistently low credit score can limit access to better loan terms, higher credit limits, and can even affect rental applications or job opportunities where credit is a factor. Therefore, the correct answer illustrates the negative impact of missed payments on a consumer's creditworthiness.