Credit scores are like financial report cards. But instead of getting grades like “A+” or “B” in different subjects, a credit score represents a person’s financial history, or "credit history," in one three-digit number between 300 and 850, with higher numbers representing a higher likelihood of repaying debts. Credit histories include a borrower’s total amount of debt, repayment history, and other financial behaviors.
Lenders use credit scores to determine how risky approving a borrower for a financial product such as a loan, mortgage, or credit card would be. They’re also used for tenant screening, determining interest rates and the amount of money one can borrow, and more, making a good credit score crucial to a healthy financial life.
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Before authorizing a purchase, card issuers consider whether or not the cardholder has a high enough available credit limit to make the purchase, where the purchase is being made in order to reduce fraud, and more.
US consumer debt nationwide totaled $17.9T as of 2024 Q3. Mortgage debt ranked as number one, with student loan debt coming in at number two.
Some credit card issuers also take your other payment obligations into account when determining your credit limit, such as the cost of your rent or alimony.
Your credit history is used to calculate your credit score. It includes information such as how often you miss payments (on credit cards, for instance), the types of financial accounts you hold, how long you’ve held those accounts, and more.
A bad credit score can lead to spending roughly $100K more on a typical mortgage. Poor scores also prevent you from getting certain jobs, apartments, and more, hindering you from building wealth in the long term.
The United States is home to more than 33 million businesses, the vast majority of which are small businesses, with millions being created (and others closing shop) every year. These businesses often rely on loans, provide the goods and services that keep the economy flowing, and sometimes even grow large enough to enter public markets or provide private investment opportunities. Explore key topics central to business and finance, from the role of the Federal Reserve to how initial public offerings work, how millions of American students finance higher education, and more.