A credit score is a number that represents your creditworthiness, or how likely you are to repay borrowed money. Lenders use it to decide whether to approve loans, credit cards, or mortgages, and to set interest rates.
How It’s Calculated
- Payment history: On-time versus missed or late payments.
- Credit utilization: How much of your available credit you are using.
- Length of credit history: How long you’ve had credit accounts.
- Types of credit: A mix of credit cards, loans, and mortgages.
- New credit inquiries: Applications for new credit accounts.
Why It Matters
Higher credit scores generally mean better loan approvals and lower interest rates. A low score can limit access to credit or increase borrowing costs.
Final Thoughts
Maintaining a good credit score requires paying bills on time, keeping balances low, and using credit responsibly. It is one of the most important measures of financial health.