A credit score represents your credit worthiness in the eyes of financial institutions and the likelihood that you will be able to repay a loan in the future. Credit providers use credit scores to assess the risk of lending you money. Ultimately, if they think you won’t be able to pay a loan back, you won’t get approved.
The credit score itself is a number that summarises the information contained in your credit file. Some credit scores range between 0 and 1000 whereas others range between 0 and 1200.
You may well have more than one credit score as each credit reporting body, and many credit providers, calculate their own based on the information they might hold on you. The information held can differ, as can the algorithms or formulas used by each.
If you have a high credit score, you have demonstrated a history of financial responsibility and can be considered to be less risky to lend to than someone with a lower credit score.
This article originally appeared on Credit Savvy and has been published with permission.