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Simple English definitions for legal terms
credit score
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A quick definition of credit score:
A credit score is a number that shows how good someone is at paying back money they borrow. The higher the number, the better chance they have of getting a loan. The number is based on things like how many loans they have, if they pay them back on time, and how much money they owe. The most common credit score is called the FICO score and is used by most big lenders.
A more thorough explanation:
A credit score is a number that represents how likely a person is to repay a loan on time. The score ranges from 300 to 850, with a higher score indicating a better chance of getting approved for a loan.
The score is calculated based on a person's credit history, which includes:
- The number of open accounts
- Repayment history
- The amount of debt
For example, if someone has a lot of credit card debt and has missed payments in the past, their credit score will be lower. On the other hand, if someone has a history of paying their bills on time and has a low amount of debt, their credit score will be higher.
The most commonly used credit scoring system is the FICO score, which was created by the Fair Isaac Corporation. It is used by 90% of top lenders.