A credit score is a numerical value that represents an individual's creditworthiness. It is calculated based on various factors such as payment history, outstanding debt, length of credit history, types of credit, and recent credit inquiries. Lenders use this score to determine the likelihood of a borrower repaying their loans on time, which helps them make informed decisions about extending credit or setting interest rates. A higher credit score indicates better creditworthiness and can result in more favorable loan terms.