What is a "credit score"?

A credit score is a numerical representation of a person's creditworthiness based on credit history and behavior. This score typically ranges from 300 to 850 and is calculated using various factors, including payment history, amounts owed, length of credit history, new credit, and types of credit used. Lenders, such as banks and credit card companies, use this score to evaluate the risk of lending money to an individual. A higher score indicates a greater likelihood that the borrower will repay debts, while a lower score suggests higher risk.

In the context of assessing loan applications, while banks do utilize credit scores, the score itself is not merely assigned by banks; it is derived from an individual’s financial behaviors over time. Hence, the focus is not on the bank's role, but on the individual's credit history and behaviors that contribute to the score.

Income stability and investment potential may play roles in a person's overall financial health or investment decisions, but they are separate from the concept of a credit score, which specifically relates to creditworthiness.