Logical reasoning PrepTest 149 · Section 1 · Question 19

Correct. Argument or Facts:
Facts

Question Type:
Paradox

Stimulus Summary:
Lenders Ð Evaluate credit score among other things, because a higher score means lower risk.
Mortgage lenders Ð Proportion of defaults is higher for those with a higher credit score

Answer Anticipation:
This stimulus, as with many Paradox questions, features some comparisons. Those comparisons are between loans in general and mortgages, and those with higher credit scores and others.

In general, those with higher credit scores are less likely to default on a loan. However, in the specific case of mortgages, they're more likely to default on that loan. There must be something different about the mortgage situation that would explain the higher risk of default. Let's find an answer that brings up something that would increase this risk specifically for mortgages.

Answer Explanation:
This answer highlights a relevant difference between mortgage lenders and others that would increase the risk of default for high credit score individuals. By ignoring other risk factors, the lenders will miss non-credit score risks that could lead to default that would be seen by the lenders more likely to look at them.

Key Takeaway:
In Paradox questions, look for unexpected comparisons. The question type tends to feature them, and noticing that there's an unexpected difference (or similarity) can help us to anticipate an answer, as it's likely to bring up a relevant comparison that matches the unexpected one.

Incorrect. First, this answer doesn't establish that similar errors aren't reported to non-mortgage lenders, which would make it a wash. Second, this answer doesn't establish that these errors are unique to just the high-credit individuals—if everyone's credit report has errors when applying for a mortgage, it should similarly be a wash.

Incorrect. This answer aligns with the expectation that a high credit score would demonstrate an ability and willingness to pay debt on time, not with the unexpected outcome of those with a high credit score defaulting on their mortgages more often.

Incorrect. This would apply equally to everyone applying for a mortgage—low and high credit score alike—and thus wouldn't explain why those with a high score default much more frequently than others.

Incorrect. Great, but why do the minority that have high credit scores default more than this majority?