Definition
A credit score is a three-digit number, typically ranging from 300 to 850, that represents your creditworthiness to lenders. It is calculated based on your credit history, including payment history, amounts owed, length of credit history, types of credit used, and new credit inquiries. Higher scores indicate lower risk to lenders and generally result in better interest rates and loan terms.
Example
Credit Score Impact on Mortgage
On a $300,000 30-year mortgage, a borrower with a 760+ credit score might qualify for a 6.5% rate with a $1,896 monthly payment. A borrower with a 620 score might only qualify for a 7.5% rate with a $2,098 monthly payment—over $72,000 extra in interest over the life of the loan.