Credit reporting system

A credit reporting system is a system that collects and maintains information about individuals’ credit histories. When people borrow money or use credit, lenders report this activity to credit bureaus, which compile data on payment behavior, outstanding debts, and credit inquiries. This information forms a credit report, which lenders use to assess an individual's creditworthiness before approving loans or credit applications. A credit score, derived from this report, summarizes the trustworthiness of the borrower. Good credit can lead to better loan terms, while poor credit can limit borrowing options.