Lenders scrutinize credit scores as part of their assessment of loan applications. Borrowers with higher credit scores are generally viewed as lower risks, leading to more favorable interest rates. The tiered structure of interest rates means that even a small difference in credit scores can result in significant variations in the interest rate offered. This direct correlation between credit scores and interest rates stems from the lender’s perspective of risk. A higher credit score implies a more reliable borrower, and, in turn, lenders are willing to offer lower interest rates as an incentive for responsible financial behavior.