What is a credit score?

A credit score is fundamentally a numerical expression that quantifies an individual's creditworthiness, which is the likelihood that they will repay borrowed funds. This score, typically ranging from 300 to 850, is calculated based on various factors, including payment history, amounts owed, length of credit history, types of credit used, and new credit inquiries. Lenders utilize this score to make informed decisions about whether to offer credit and under what terms, such as interest rates and credit limits. A higher credit score indicates a lower risk for lenders, making it easier for individuals to qualify for loans and favorable interest rates.

The other options do not accurately describe a credit score. A measure of income level relates to an individual's earnings, not their ability to manage debt or credit. A detailed record of an individual's banking history might include transactions but does not reflect their credit risk directly. An evaluation of real estate holdings pertains to property valuation rather than assessing an individual's creditworthiness. Thus, the focus on credit scores is crucial in the context of personal finance, making it clear that the correct answer centers around their role in signaling creditworthiness.