Which metric indicates to lenders your ability to repay a loan?

• A. Emergency preparedness
• B. Credit score
• C. Cost per wear
• D. Debt-to-income ratio

Answer: (B)

Credit score is a quick, standardized snapshot of how you’ve managed credit in the past. It pulls together your payment history, how much you currently owe, how long you’ve had credit, how many new accounts you’ve opened, and your mix of credit types. Because it’s based on actual past behavior, lenders use it to estimate the odds you’ll repay a new loan. A higher score signals lower risk, which often means easier approval and better terms.

Emergency preparedness and cost per wear aren’t financial signals lenders use to judge loan repayment. Emergency preparedness is about planning for unexpected events, and cost per wear is a budgeting concept for clothing. Debt-to-income ratio does relate to your ability to take on and handle debt by comparing debt payments to income, but the credit score is the most common single indicator lenders rely on to gauge overall repayment likelihood.