What is credit risk pdf

What is the introduction of credit risk?
Credit risk is a specific financial risk borne by lenders when they extend credit to a borrower.
Lenders seek to manage credit risk by designing measurement tools to quantify the risk of default, then by employing mitigation strategies to minimize loan loss in the event a default does occur..
If your credit score lands between 300 and 579, it is considered poor and lenders may see you as a risk.
Here's how the FICO credit scoring system ranks credit scores: Poor: 300-579.
Fair: 580-669.
Good: 670-739.
Why is credit risk important? It's important for lenders to manage their credit risk because if customers don't repay their credit, the lender loses money.
If this loss occurs on a large enough scale, it can affect the lender's cash flow.

Credit risk or default risk involves inability or unwillingness of a customer or counterparty to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions. The Credit Risk is generally made up of transaction risk or default risk and portfolio risk.

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What is credit risk pdf

What is the introduction of credit risk?