Credit Risk

What is credit risk?

Credit Risk Definition: Credit risk refers to the amount of potential loss due to a borrower’s inability to pay a loan or mortgage in full. The more likely a borrower is to fail repayment of a loan, the higher the risk to the lender.

If a prospective borrower has too high of credit risk, they may not be approved for the loan or credit card. When a lender is impacted by an increase in credit risk, this can be remedied with a higher cash flow. For this reason, many lenders perform credit checks and reviews of a borrower’s credit history before they approve.

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