What best describes a credit risk assessment?

A credit risk assessment involves evaluating an applicant's financial behaviors and patterns to predict how they may manage credit in the future. This process takes into account various factors, such as the applicant's credit history, income level, and overall financial stability, to assess the risk involved in extending credit to them.

By predicting financial behavior, lenders can make informed decisions about whether to approve credit, the terms of the credit (such as interest rates), and how much credit to extend. This proactive approach helps to minimize defaults and losses for financial institutions.

The other options, while related to aspects of credit evaluation and assessment, do not fully encapsulate the broader scope of assessing a borrower's overall financial behavior in the context of credit risk modeling. Evaluating the likelihood of fraud is more focused on security measures rather than predicting future behavior. Reviewing individual credit reports is a part of the process but is not the sole focus of a credit risk assessment. Determining available credit limits is a decision made after an assessment, rather than a description of the assessment itself.