What is the role of credit scores in financial planning?

Credit scores play a crucial role in financial planning as they indicate an individual's creditworthiness. This score is a numerical representation of a borrower's credit history and financial behavior, which lenders use to determine how likely a person is to repay borrowed money. A higher credit score generally suggests that an individual is a reliable borrower, which can lead to better loan terms, lower interest rates, and increased access to credit.

In the context of financial planning, understanding one's credit score is essential for making informed decisions regarding loans, mortgages, and other forms of credit. Financial planners often help clients improve or maintain their credit scores as part of their overall financial strategy, recognizing that these scores are important not only for securing financing but also for managing financial health effectively.