What is an adverse effect of a low FICO score for borrowers?

A low FICO score indicates to lenders that a borrower may be a higher risk, which often leads to higher interest rates on loans. Lenders use credit scores to assess the likelihood that a borrower will repay their debt; a lower score suggests potential issues with repayment in the past, prompting lenders to charge more to offset this risk. Consequently, borrowers with low FICO scores typically face increased borrowing costs, which can make it more difficult for them to manage their financial obligations and may limit their access to credit.

In contrast, a low FICO score does not lower the chances of bankruptcy, increase job opportunities, or lead to more favorable loan terms, making the other options less relevant in illustrating the adverse effects associated with a low credit score.