Business
How does a credit score work?
A credit score works as a number that predicts how likely you are to repay borrowed money. Lenders calculate it from your history of paying bills, debts, and loans — and use it to decide whether to lend to you and at what interest rate.
See it in motion.
Watch a 2-minute animated lesson that shows exactly how a credit score works.
Step by step
- 1It summarizes your borrowing history into a single number.
- 2On-time payments raise it; missed payments and heavy debt lower it.
- 3Lenders use it to judge risk and set interest rates.
- 4A higher score means cheaper, easier access to credit.
- 5It's built over time and can be improved with good habits.
Frequently asked questions
- What affects your credit score?
- Mainly your payment history, how much debt you carry, the length of your credit history, and recent applications for new credit.
- Why does a credit score matter?
- It decides whether lenders approve you and what interest rate you pay, affecting the cost of loans, cards, and sometimes housing or jobs.
- How can you improve a credit score?
- Pay bills on time, keep debt low relative to your limits, avoid opening many accounts at once, and let your history age.