A credit score is calculated based on the factors such as length of the credit record, payment history, credit utilisation ratio and credit exposure. Any defaults and negative issues can lower the credit score immensely.

A credit score is a three-digit numerical expression which is derived based on the information available on your credit report. It is computed using your credit and payment history, type of borrowings, credit utilisation etc.

The lenders report their customer's credit information to the credit bureaus who compute the credit scores based on the credit behaviour.
A credit report gives a snapshot of an individual's credit accounts, repayment history and various other financial dealings. The credit score is calculated based on the above factors. Creditors check the credit score before taking a decision to extend credit to their customers.
The credit score in the case of self-employed individuals also gives a picture of how well that individual manages the business. A business credit health report gives the lender an idea at glance as to how a business functions. A business credit health check is vital for managing the business efficiently and keeping track of the credit related activities.

When an individual applies for a loan or any other credits, the lenders refer to the credit score to evaluate the creditworthiness and eligibility. It becomes a decisive factor for the banks to grant credit to their consumers. A good credit score not only helps in getting a loan but also favours in terms of interest rate.
Periodically checking the credit score gives the individual an idea about their credit worthiness, in case of past defaults and if they have applied for credit improvement services, the progress of which can be tracked from time to time.
It is also wise to check your credit score before applying for any kind of credit, be it the credit cards for your shopping needs to the all-important home loan which fulfils your dream of a bigger house. Knowing your credit score before applying for credit and in the case of a good credit score puts you in an advantageous position with respect to negotiations on interest rates and loan tenure.