A credit score is a numerical calculation of whether or not a person is credit worthy. A credit score is usually attained after looking at all the credit files of the person in question from various credit bureaus. In other words, all the files from different credit bureaus are collected and analyzed before a credit score can be attained.
Credit scores are usually used to determine whether or not a person qualifies for a loan, how much money they qualify for and the amount of interest that will be charged on the loan. Additionally, credit scores are also used by lenders to determine which debtors are expected to bring in the most revenue. By using credit scores, lenders get to evaluate the risks associated to lending certain people money. It, therefore, allows them to only lend money to those people who present less risk, or those who are likely to repay the loan in time. It is a method that allows lenders to mitigate loss that usually results from bad debts.
The higher your credit score, the better you credit and the more chances you have of getting the loan. Think of a credit score like a test score. The more marks you get, the better your chances of getting what you want. When you have a good credit score, it means that there is a high probability that you will repay the loan within the stipulated time. Therefore, it is only if you intend to get a loan at some point, especially from institutions like banks, you need to work toward having a good credit score. A good credit score means that you have a high chance of getting the loan that you want and good interest rates. A good credit score is, therefore, something that will make lenders trust you that much more.
Essential to note is that in most cases, different lenders calculate credit scores on their own. In other words, they make their calculations. As a result, you might end up having different credit scores for different lenders. All that matters is that all your credit scores remain as low as possible.