What is the primary purpose of a credit report?

The primary purpose of a credit report is to assess an applicant's creditworthiness. A credit report compiles an individual’s credit history, which includes details such as the types of credit accounts held, payment history, outstanding debts, and any late payments or defaults. Lenders use this information to evaluate how likely the applicant is to repay borrowed money. A strong credit report suggests that the individual is a low-risk borrower, whereas a poor credit report might indicate higher risk, potentially leading to higher interest rates or denial of credit altogether. This assessment is crucial for various financial activities, including applying for loans, credit cards, and sometimes even rental applications.

In contrast, a credit report does not focus on job changes, bank account information, or personal health records, which is why those aspects are not relevant to the determination of creditworthiness. The information in a credit report is specifically curated to help lenders and financial institutions make informed decisions about extending credit.