What is the purpose of a credit report?

The purpose of a credit report is to provide a detailed account of an individual's credit history. This comprehensive document includes information about credit accounts, payment history, outstanding debts, and any public records such as bankruptcies or liens. Lenders use credit reports to assess a person’s creditworthiness when considering loan applications, making them a crucial component in the lending process.

While estimates of loan eligibility and tips on improving credit scores are important aspects of managing one’s finances, they are not the primary purpose of a credit report. Additionally, while a credit report does contain information about financial liabilities, its main focus is on the history of credit use and payment behaviors, not simply listing all outstanding liabilities. This detailed insight helps lenders make informed decisions regarding lending and enables individuals to understand their credit standing.