Credit Scoring

Credit scoring is a method used by lenders to evaluate the creditworthiness of a borrower. It involves the use of a numerical score generated based on an individual’s credit history and financial behavior, including factors such as payment history, amounts owed, length of credit history, types of credit used, and new credit inquiries. The resulting score typically ranges from 300 to 850, with higher scores indicating a lower risk of default. Credit scoring helps lenders make informed decisions about whether to extend credit, the terms of the loan, and the interest rates to offer. It serves as a standard metric for assessing an individual's ability to repay borrowed money and is crucial in determining access to various financial products, such as mortgages, credit cards, and personal loans.