Credit Score

Definition

A credit score is a three-digit number evaluation that represents the creditworthiness of an individual. This score is typically calculated by the credit reporting agencies, such as Equifax or TransUnion in Canada, which tracks how the common population pays back debt, such as credit cards bills, bank loans, car loans and so on.

One could have different scores depending on the lending situation. For example, an auto lender might use one scoring model, while a mortgage lender might use another. Scores may vary with different ways available to calculate credit scores. However, they all are based on the information in one’s credit reports.

Explore Definition

Credit Score kept simple

Credit score indicates how likely an individual is to make payments on time or fail to pay a loan. Credit scores are typically based on things like how often an individual makes payments on time and how many accounts the individual has in good order.
It is important to note that the score will never be based on personal information like one’s race, gender, religion, marital status or national origin.

How does Credit Score apply to you

Lenders, such as banks while giving loans and credit card companies, use credit scores to calculate the possible risk that could cause by lending money to consumers, so as to determine – who qualifies for a loan, at what interest rate, and what credit limits.

However, credit scoring is not limited to banks. Various other organizations, such as mobile phone companies, insurance companies, landlords, etc., employ the same techniques while offering sim cards, insurances and renting apartments, respectively.

Share this to help everyone get a better understanding of finance

Facebook
Twitter
LinkedIn
WhatsApp

Be the first to try the app

Sign-up and get exclusive access to try the app when we launch. It’s time to control your finance.

About us

Control all aspects of your finances. Learn about what you need to know to make smart decisions. But most of all, have trust that we’re here to help. In the end, you’ll have more time to do what you love.
Chango - Unifying your financial world. | © 2018 Chango Card Inc.

Rethinking personal finance

Subscribe to be part of the next wave in finance

Upgrade your finances.

Keep informed with the most important financial terms. Explained without any jargon.Learn how to budget for a debt free life and how to get the best out of the Chango financial wellness and budgeting app.