Final answer:
A credit score is a statistical number that represents a consumer's creditworthiness, based on their financial history, including loan repayment and credit card debt. Credit ratings influence the terms banks offer to borrowers. Good financial behavior can improve a poor credit score over time.
Step-by-step explanation:
A statistical number used to represent a consumer's creditworthiness is commonly known as a credit score. This score is derived from a person's financial history, including their previous borrowing history and how reliably they have paid back loans and credit card debts. Credit scores are calculated by credit bureaus such as Standard & Poor's and Moody's and are used by banks to determine interest rates for borrowers. The higher the credit score, the more confidence the bank has in the borrower's ability to repay, which can result in more favorable loan conditions, such as lower interest rates.
In addition to credit scores, banks also consider savings and other investments before making a lending decision. This is part of a fair credit assessment that does not take personal characteristics like race, gender, or religion into account. While a poor credit rating can affect borrowing terms, it doesn't have to haunt a borrower forever as credit scores can change over time with responsible financial behavior.