Credit scoring is a numerical representation of a person's creditworthiness, typically ranging from 300 to 850. It is calculated based on various factors, including payment history, credit utilization, length of credit history, types of credit accounts, and recent credit inquiries. Lenders use this score to assess the risk of lending money or extending credit to an individual. A higher credit score indicates a lower risk for lenders, which can lead to better loan terms and interest rates. Conversely, a lower score may result in higher interest rates or difficulty obtaining credit. Understanding your credit score can help you manage your finances and improve your borrowing potential.