Why do lenders use credit scores?
When a lender or financial institution provides loans, mortgages and lines of credit, they have to estimate how probable it is that they'll get their initial investment back plus interest payments. People with a higher credit score are likely to be more attractive to lenders, as the score demonstrates that these people should be more financially responsible.
Since it's a higher risk to lend to someone with a lower score, lenders try to protect themselves in the event that the borrower defaults on the payments. One way they do this by charging higher interest rates in an attempt to balance out the higher risks.
Missing payments or routinely being late on your payments are red flags that show you can't successfully manage your finances. Make it a priority never to miss a payment, because this can stay on your record for up to 2 years and if you’re very late, a default can be registered against you and this could stay on your credit report for up to 5 years, therefore making it much more difficult for you. Finally, lenders like to see that you can adequately handle different types of credit accounts. Lenders may be more willing to lend to you if they see different account types, all in good standing and being well-maintained.