What does a credit score represent?

A credit score represents an assessment of an individual's creditworthiness, which is a numerical expression based on an individual's credit files. This score is primarily used by lenders to evaluate the likelihood that a borrower will repay their debts. Factors that influence a credit score include payment history, the amount of debt owed, length of credit history, types of credit in use, and new credit inquiries.

This measurement helps lenders determine if they should extend credit to an individual and under what terms, including the interest rate and credit limit. A higher credit score indicates a better credit risk, often leading to more favorable borrowing conditions.

The other choices reflect different financial concepts but do not correctly define what a credit score is. For example, one's investment portfolio performance relates to the returns on investments rather than credit. The total amount of debts owed indicates the borrower's liabilities but does not encompass the evaluation of creditworthiness. Similarly, the interest rate offered by banks is often influenced by the credit score but is not synonymous with what the credit score represents.