What is the purpose of a credit score?

The purpose of a credit score is primarily to determine eligibility for loans and credit. A credit score is a numerical representation of a person's creditworthiness, which lenders use to evaluate the risk of lending money or extending credit. This score is influenced by several factors including payment history, credit utilization, length of credit history, types of credit in use, and new credit inquiries.

When a borrower applies for a loan or a credit card, lenders consider the individual's credit score as a key factor in their decision-making process. A higher score typically indicates a lower risk to the lender, potentially resulting in better loan terms, such as lower interest rates or higher credit limits. This highlights the importance of maintaining a good credit score to increase the likelihood of obtaining financing under favorable conditions.

The other options do not reflect the primary function of a credit score. Savings account interest rates are generally determined by the bank's policies and market conditions rather than an individual's credit score. Retirement savings calculations concern different financial metrics and planning, while projecting future income does not directly relate to the credit evaluation process, which focuses on past credit behavior.