The Hidden Cost of Bad Credit

At the top are “prime” borrowers, who get access to cheap money. At the bottom are

“subprime” borrowers, who pay a permanent surcharge just for existing. Let’s look at how

this plays out in real life. The biggest purchase most people ever make is a home.

Say both Ethan and Lucas want to buy a $400,000 house. Lucas, with his pristine

credit score above 760, qualifies for the best advertised mortgage rate—let’s

say 6%. Ethan, with a score around 620, is not denied the

loan. That would be inefficient. Instead, the bank labels him “higher risk”

and quietly raises the rate to 7.5%. One and a half percent doesn’t sound dramatic. It doesn’t feel