Which term is a rating used by credit reporting companies to help lenders decide whether to extend credit?

Which term is a rating used by credit reporting companies to help lenders decide whether to extend credit?

• A. Credit Utilization
• B. Credit Score
• C. Credit Limit
• D. Interest Rate

Answer: (B)

Credit scores are the rating used by credit reporting companies to help lenders decide whether to extend credit and on what terms. It’s a three-digit number created by models like FICO or VantageScore that sums up your credit history—such as on-time payments, amounts owed, length of credit, new accounts, and types of credit. Lenders rely on this score to judge risk, so a higher score often leads to easier approval and better interest rates. Credit utilization shows how much of your available credit you’re using, and while it affects your score, it isn’t the rating itself. The credit limit is the maximum amount you can borrow, not a rating, and the interest rate is the borrowing cost, influenced by your score but not the rating itself.

Credit scores are the rating used by credit reporting companies to help lenders decide whether to extend credit and on what terms. It’s a three-digit number created by models like FICO or VantageScore that sums up your credit history—such as on-time payments, amounts owed, length of credit, new accounts, and types of credit. Lenders rely on this score to judge risk, so a higher score often leads to easier approval and better interest rates. Credit utilization shows how much of your available credit you’re using, and while it affects your score, it isn’t the rating itself. The credit limit is the maximum amount you can borrow, not a rating, and the interest rate is the borrowing cost, influenced by your score but not the rating itself.