Credit score

A credit score is a number calculated by specialized companies based on your record of borrowing and repayment. It reflects whether you paid bills on time, how much debt you carry, what portion of your available credit you use, and how often you have applied for new loans. A higher score signals lower risk to a lender.

Because a score does not only decide whether you are lent to. It decides what you pay. The same loan, the same amount over the same term, priced against two different records, comes back with two different rates, and across the life of a multi-year loan that gap is a larger sum than most people expect from a number they have never seen.

What moves it is narrower than people assume. Paying on time, and using a small shareTermStock×السهمA share of ownership in a company, bought and sold on a stock exchange, that may pay dividends and rise or fall in value.Open the term of the credit already available to you, are most of the score between them. Income is not in it at all: a high earner who pays late scores worse than a modest earner who never does, which is why the score reads as a record of behaviour rather than a measure of standing.

It also has a memory, and the memory is asymmetric. A missed payment is registered within a month and stays on the file for years, while a good record is built only by repetition. That asymmetry is the practical argument for automating at least the minimum payment on anything that reports to a bureau: the cost of one lapse is far larger than the benefit of one payment made on time.

• A credit score measures your payment behavior, not your wealth or income.
• A single late payment damages your score, but building a good record takes years.
• Applying for multiple loans in a short period lowers your score even if you do not actually borrow.
• Ask the bureau that holds your file for a copy at least once a year. Data errors happen, and you carry the cost of one until you dispute it.