What is a credit score and why might it matter?

• A. A number that shows how likely you are to repay debt; it can affect borrowing terms.
• B. A bank account balance.
• C. A measure of income tax responsibility.
• D. The price of a loan.

Answer: (A)

Credit score is a number that shows how likely you are to repay debt. Lenders use it to decide whether to lend you money and what terms to offer. It’s based on patterns from your borrowing and repayment history, including how you’ve paid on time, how much you currently owe, how long you’ve had credit, whether you’ve recently opened new accounts, and the variety of credit you use. This score matters because it helps determine if you’ll be approved for loans or credit cards and what interest rate you’ll pay. A higher score usually means easier approval and lower interest rates, while a lower score can mean higher costs or not getting approved. It’s not your bank account balance, not a measure of your income taxes, and not the price of a loan—the loan price comes from the interest rate and terms, which the score helps lenders assess.