What is a Credit Score?
Credit Scores What is a credit score? A credit score is a measurement of how likely you are to pay back any type of loan. A good credit score tells lenders that you are responsible with your finances and will most likely be able to pay them back for borrowing money. Similarly a bad credit score tells lenders that you are not trustworthy with your money, and lending money to you would be a risky venture. Lenders view us as potential investments or liabilities similar to how you or I would speculate on certain stocks, bonds or ETFs. As with all finances, the common mantra, "high risk, high reward" and "low risk, low reward" hold true, even to lenders. Lenders charge higher loan rates (known as "APR" or Annual Percentage Rate") to individuals who are at a higher risk for being unable to pay back a loan. You can think of this policy as the cost of doing business, and the cost of risking their money on an unsure bet. Inversely, lenders will reward pe...