What is a credit score?
A credit score is a number that reflects the creditworthiness of an individual. It is used by lenders to determine whether or not to extend credit, and if so, at what terms. A high credit score indicates a lower risk of default, while a low credit score indicates a higher risk of default.
a number assigned to a person that indicates to lenders their capacity to repay a loan.
a numerical ranking of an individual’s financial creditworthiness based on spending and credit history, indicating to potential lenders and credit card issuers the individual’s capacity and likelihood to make timely payments of amounts due on loans or credit cards.
A credit score is a numerical expression based on a level analysis of a person’s credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bureaus.
Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Lenders use credit scores to determine who qualifies for a loan, at what interest rate, and what credit limits. Lenders also use credit scores to determine which customers are likely to bring in the most revenue.
Credit score explained
There are a number of factors that go into determining one’s credit score, including payment history, credit utilization, length of credit history, and more. Payment history is the most important factor, accounting for 35% of a credit score. This means that making on-time payments is crucial to maintaining a good credit score.
Credit utilization, or the amount of credit used in relation to the amount of credit available, is also an important factor. Using too much of your available credit can hurt your score, so it’s important to keep your balances low. Length of credit history is also a factor, so it’s important to keep your accounts open and active.