why are interest rates higher for people with low credit scores?

Question

I’m asking specifically about people in the U.S. looking to borrow from a lender.

In: 0

Answer 1

I understand the reason but also think it’s f’ed up. I think the system is designed to keep people in debt with how credit rating is determined. If someone is determined to have too much debt it lowers their score. So then if they try to get a loan to consolidate the debt at a lower rate to make it easier to pay off they don’t qualify due to having too much debt. Doesn’t matter if they haven’t had any late payments or consistently paid all their bills. So then they are stuck in the cycle of trying to play catch up.