What is Credit Score?
A credit score is a numerical expression of the creditworthiness of a person. It is a rating that represents the ability of an individual to pay off their financial commitment or debt. Lenders and financial institutions use a person’s credit score to assess the risk of extending credit to a person. The credit score is calculated based on factors like credit accounts, payment history, outstanding debts, length of credit history, and recent credit applications of a person. Certain credit reporting agencies namely, TransUnion CIBIL, Equifax, Experian, and CRIF High Mark rate the creditworthiness of the people by assigning credit scores. It is believed higher the credit score, the better the creditworthiness.
Geeky Takeaways:
- A credit score is a numerical value that represents the creditworthiness of a person. Here, creditworthiness means the ability of a person to repay the debts or loan on time.
- A credit score is expressed in numbers. It is a three-digit number typically ranging from 300 to 900, with a higher score indicating better creditworthiness.
- Factors that impact the credit score of any individual include credit accounts, payment history, outstanding debts, length of credit history, and recent credit applications of that individual.
- Credit score benefits both the parties, the lender as well as the borrower. Lenders, use credit scores to judge the creditworthiness of the borrower and calculate the risk of lending money. On the other hand, a borrower with a high credit score enjoys better interest rates and more favorable terms on loans and credit products.
Table of Content
- How Credit Score Works?
- How Credit Score is Calculated?
- Factors Affecting Credit Score
- How can I Check and Monitor my Credit?
- How to Improve Your Credit Score?
- Frequently Asked Questions (FAQs)
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