Which of the following best defines a credit report?

• A. A report showing the interest rates offered by different banks.
• B. A summary of an individual's monthly income and expenses.
• C. A document that lists all of an individual's assets and liabilities.
• D. A detailed record of an individual's borrowing and repayment history, used by lenders to assess creditworthiness.

Answer: (D)

Verified step by step guidance

1. Understand the concept of a credit report: A credit report is a detailed record of an individual's borrowing and repayment history, including information about loans, credit cards, payment history, and outstanding debts. It is used by lenders to assess the creditworthiness of an individual.
2. Clarify why the other options are incorrect: The other options describe different financial documents or summaries, such as interest rate comparisons, monthly budgets, or personal balance sheets, none of which serve the purpose of assessing creditworthiness.
3. Recognize the importance of a credit report: It helps lenders evaluate the risk of lending money to an individual and determines the terms of credit, such as interest rates and loan amounts.
4. Identify the key components of a credit report: These typically include personal information, credit accounts, payment history, inquiries, and public records (e.g., bankruptcies or liens).
5. Relate the definition to practical use: Credit reports are crucial for financial decision-making, such as applying for loans, mortgages, or credit cards, and maintaining a good credit score is essential for favorable lending terms.