What is the purpose of a credit score?

A credit score serves a critical function in the financial ecosystem by evaluating an individual's creditworthiness and predicting their likelihood of repaying debt. It is a numerical representation that financial institutions use to determine the risk associated with lending money. The higher the credit score, the more likely a person is to be seen as a reliable borrower, which can open doors to loans and credit with favorable terms.

Understanding credit scores is essential because they affect various financial aspects, such as approval for mortgages, car loans, and credit cards, as well as the interest rates offered on these products. A good credit score not only increases the chances of securing loans but can also lead to lower interest rates, saving the borrower money over time.

The other options presented do not encapsulate the primary role of a credit score accurately. While tracking spending habits and calculating savings growth are important aspects of personal finance, they do not relate to assessing creditworthiness. Furthermore, while credit scores do play a role in determining loan interest rates, they are not limited to this function alone but instead encompass a broader evaluation of an individual's credit behavior.