Which financial document is typically required to assess a borrower’s ability to repay?

The credit report is essential for assessing a borrower's ability to repay a loan because it provides a comprehensive overview of their credit history and current credit status. This document includes details about the borrower's past borrowing and repayment behavior, such as outstanding debts, payment history, and any defaults or bankruptcies. Lenders rely on this information to evaluate the risk of lending to the borrower, as it reflects their financial responsibility and likelihood of repaying future loans.

In comparison, while a bank statement offers insights into a borrower’s current financial situation by showing account balances and transaction history, it does not provide the complete picture of creditworthiness. Tax returns can help verify income but might not fully represent a borrower's ongoing financial health, especially if their income fluctuates. Employment verification can confirm job status and income but lacks the historical perspective of credit behavior that is critical for lenders to assess risk effectively. Thus, the credit report is the most critical document when it comes to evaluating a borrower's repayment ability.