What is a credit score, and how is it calculated?

A credit score is a threedigit number that summarizes a person's creditworthiness and credit history. It's used by lenders, credit card companies, and other financial institutions to determine whether or not to lend money to an individual, and at what interest rate. Credit scores are calculated based on information from a person's credit report, which includes their credit history, payment history, outstanding debts, length of credit history, and new credit inquiries.

The most commonly used credit scores are FICO scores, which range from 300 to 850. The higher the score, the better a person's creditworthiness is considered to be. The exact formula for calculating a FICO score is proprietary, but it generally takes into account factors such as payment history (35% of the score), amounts owed (30% of the score), length of credit history (15% of the score), new credit (10% of the score), and types of credit used (10% of the score).