What is the primary purpose of credit scores?

The primary purpose of credit scores is to evaluate a borrower's creditworthiness. A credit score is a numerical representation of a person's credit risk, calculated based on their credit history, including factors such as payment history, amounts owed, length of credit history, types of credit used, and new credit inquiries. Lenders use this score to assess the likelihood that a borrower will repay their debts. A higher score suggests a lower risk for the lender, indicating that the borrower is more likely to meet their financial obligations.

While credit scores can influence interest rates for loans, which makes the first choice related, it is more accurate to say that they serve as a tool for assessing creditworthiness rather than their primary purpose being about setting interest rates. The other options, such as measuring the economy's overall health or predicting inflation rates, are broader economic indicators and not directly related to what credit scores are designed to accomplish. Credit scores are specifically tailored to help lenders make informed lending decisions based on individual borrower profiles.