A Credit Score is a number given to a person (or company) that represents his or her “creditworthiness.” Creditworthiness is a gauge of how likely a person will be to pay back his or her debts. Lenders use Credit Scores to try to predict how high risk each potential borrower is. The higher the risk a potential borrower is, the more they will charge them to lend to them (in the form of higher interest rates and/or more collateral). This is their form of “insurance” to protect the company in these “higher risk” scenarios.

Lower Credit Score = Higher Potential Risk= Higher Interest Rate and/or = Lower Credit Limit and/or = Higher Down Payment and/or = Higher Collateral

Credit scores are based on numerous factors. Some of these include (but are not necessarily limited to): the person’s individual payment history, length of credit history, ratio of balances used vs credit available, recent credit inquiries, etc.