What does requiring a "credit check" entail for a lender?

Requiring a "credit check" for a lender primarily involves a review of the borrower's credit report. This report provides crucial information about the borrower's credit history, including their payment habits, outstanding debts, credit accounts, and any negative marks such as late payments or bankruptcies. By analyzing this information, the lender can assess the borrower's creditworthiness, which helps determine whether to approve the loan application and what interest rate to offer.

Understanding a borrower’s credit report is essential for evaluating risk, as it reflects their reliability in repaying debts. It's a key factor in the lending decision process, allowing lenders to make informed choices based on the financial behavior and responsibilities of potential borrowers.