PSI Virginia Real Estate Practice Exam

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Prepare for the PSI Virginia Real Estate Exam. Study with flashcards and multiple choice questions, each question has hints and explanations. Get ready for your exam success!

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What does a negative credit history generally indicate?

A strong ability to secure loans
A history of reliable repayment
Increased risk for lenders
Financial success in previous transactions

The correct answer is: Increased risk for lenders

A negative credit history generally indicates an increased risk for lenders because it reflects past behaviors that may include missed payments, defaults, or bankruptcies. Lenders use credit history as a key factor in assessing the likelihood that a borrower will fulfill their repayment obligations in the future. When a borrower has a negative credit history, it raises concerns about their reliability and ability to manage debt effectively. High-risk borrowers often face challenges when trying to obtain new loans or may only qualify for loans with higher interest rates due to their perceived risk. This context helps lenders make informed decisions about lending and establishing the terms of credit.