What is a Credit Risk?
Credit risk is the risk of non-payment of a debt that may arise as a result of a borrower’s failure to make required payments. In the first case, the risk belongs to the creditor and includes loss of principal and interest, disruption of cash flow, and increased collection costs. The loss may be total or partial. Now I am studying my credit rating and how to improve it, I often watch YouTube videos to understand better
A credit risk is the amount of potential for default that is inherent in a given debt investment or extension of credit. A lender or an investor in various types of bonds carries a degree of credit risk on any transaction conducted. Assessing the degree of risk involved is essential before completing any type of lending or investment transaction. In the case of lending money, the entity that provides the loan carries the credit risk. For this reason, a lender will want to know pertinent information regarding the ability of the borrower to repay the amount of the loan, including all finance charges and related fees. If the lender is unable to determine that the borrower will be able to repay the loan, the borrower may be considered a poor credit risk and be denied. With the purchase of bond issues, it is the buyer who assumes a degree of credit risk. Bonds generally carry a commitment on the part of the bond issuer to provide the buyer with full repayment of the purchase price of the bo
