What is a credit score and how is it calculated?

A credit score is a numerical rating that reflects an individual's creditworthiness, based on their credit history. It is calculated by credit reporting agencies, such as Equifax, Experian, and TransUnion, using a complex algorithm that takes into account several factors. These factors may include payment history, credit utilization, length of credit history, types of credit accounts, and recent credit inquiries. The resulting score typically ranges from 300 to 850, with higher scores indicating better creditworthiness and a lower risk of defaulting on loans or credit accounts. Lenders and other financial institutions use credit scores to assess an individual's creditworthiness and determine whether to approve them for loans, credit accounts, or other financial products.