Your credit score or rating is reflective of your credit related activities — this includes the bills you pay, the types of credit products you have (like credit cards, loans or mortgages), your debt levels, and credit inquiries.
All these factors go into how the credit bureau determines your credit score which is generally a number between 300 and 900. The higher the number, the better your credit rating. But why is this important? Simply, it uses past behaviour to estimate your ability to pay back debt. Your credit score, along with other factors, can impact both the amount of credit you could be approved for, and in some cases the interest rate you will pay.
So if you have a history of late payments or already have credit products that are near their limits, this may impact your ability to be approved for a loan. Having an established credit history may also impact other activities, such as being eligible to rent an apartment.
Learn about building credit in the next section.