Banks and other financial institutions use credit scores to determine a person’s “creditworthiness.” This just looks at their ability to repay borrowed credit, such as a loan. These lenders use a person’s score to decide whether they will approve their applications for a loan or credit card, and to avoid situations of bad debt or fraud.
Since every lending institution has their own risk grading, it is important to have a high (or good) credit score. For example, one bank may consider a score above 700 to be good, while another bank may prefer a score above 750.
Different lenders may also place more emphasis on different aspects of your credit score, such as your credit utilization, or your payment history. Thus, in general, a score above 750-800 should be considered good in most situations.
When you have a higher credit score, it means that you have demonstrated good credit behavior in the past. This means that potential lenders might have more confidence in approving your credit requests. You might also be able to get other benefits, such as lower interest rates, better terms of repayment, and a quicker loan approval process.
Thus, having a good or high credit score can help you get your credit applications approved, while a bad or low credit score can contribute to your loan and credit card applications being rejected.