credit score

A credit score is a number assigned to a person indicating their capacity to repay a loan to potential lenders. It is based on a person’s spending and credit history and ranks financial creditworthiness.

Banks or other creditors use this score to assess a potential borrower’s credit risk, that is, the probability they will default on a loan. A good credit score can result in a lower interest rate being offered, which will lower the total interest paid over the life of the loan.

Credit scores are calculated taking into account the individual’s financial history, including the timeliness of payments of credit cards, loans, and consumer bills, and any defaults on outstanding debts. Improvements in any of these areas can raise a credit score, while any deteriorations can lower a score.

Credit card issuers use a credit score to limit the amount of outstanding balance a cardholder may have.

A FICO Score (the credit rating most used by banks and credit card issuers) can range from a low of 300 to a high of 850, the higher numbers reflecting more ideal borrowers.

“A good credit score can help you qualify for financing, such as personal loans.”
—”What Is A Credit Score (And Why It Matters)” Rocket Loans. Retrieved March 15, 2020.

“Apart from a good credit score, lenders also look at factors such as your individual income and your ability to pay back another loan.”
—”Personal Loan Vs. Credit Card” Rocket Loans. Retrieved March 15, 2020.

“While it depends largely on the lender, the minimum credit score you’ll need to get a personal loan usually falls anywhere between 600 to 700.”
—”How To Get A Personal Loan” Rocket Loans. Retrieved March 15, 2020.

• ​credit
• credit rating
• credit utilization ratio
• FICO score
• credit risk
• creditworthiness
• interest rate
• loan