What Is a Credit Loss Ratio? A credit loss ratio measures the ratio of credit-related losses to the par value of a mortgage-backed security (MBS). Credit loss ratios can be used by the issuer to measure how much risk they assume. Different mortgage-backed securities and different sections within a mortgage-backed security—also referred to as tranches—have
What Is the Credit Market? Credit market refers to the market through which companies and governments issue debt to investors, such as investment-grade bonds, junk bonds, and short-term commercial paper. Sometimes called the debt market, the credit market also includes debt offerings, such as notes and securitized obligations, including collateralized debt obligations (CDOs), mortgage-backed securities
What Is a Credit Score? A credit score is a number from 300 to 850 that rates a consumer’s creditworthiness. The higher the score, the better a borrower looks to potential lenders. A credit score is based on credit history: number of open accounts, total levels of debt, repayment history, and other factors. Lenders use
What Is Credit Scoring? Credit scoring is a statistical analysis performed by lenders and financial institutions to determine the creditworthiness of a person or a small, owner-operated business. Credit scoring is used by lenders to help decide whether to extend or deny credit. A credit score can impact many financial transactions, including mortgages, auto loans
What Is a Credit Agency? A credit agency is a for-profit company that collects information about individuals’ and businesses’ debts and assigns a numerical value called a credit score that indicates the borrower’s creditworthiness. Understanding Credit Agencies Creditors and lenders, such as credit card companies and banks, report their customers’ borrowing activity and history to credit
What Is a Credit Agreement? A credit agreement is a legally-binding contract documenting the terms of a loan agreement; it is made between a person or party borrowing money and a lender. The credit agreement outlines all of the terms associated with the loan. Credits agreements are created for both retail and institutional loans. Credit
What Is Credit Analysis? Credit analysis is a type of financial analysis that an investor or bond portfolio manager performs on companies, governments, municipalities, or any other debt-issuing entities to measure the issuer’s ability to meet its debt obligations. Credit analysis seeks to identify the appropriate level of default risk associated with investing in that
What Is a Credit Application? A credit application is a request for an extension of credit. Credit applications can be done either orally or in written form, usually through an electronic system. Whether done in person or individually, the application must legally contain all pertinent information relating to the cost of the credit for the
What Is a Credit Business Associate (CBA)? The Credit Business Associate (CBA) designation is sponsored by the National Association of Credit Management (NACM) and targeted toward individuals who want a career in credit management. The designation shows that the holder has mastery in financial statement analysis, basic financial accounting, and business credit principles. Key Takeaways
What is Credit Card Arbitrage Credit card arbitrage refers to the process of borrowing money from a credit card at a low interest rate and then investing that money at a higher interest rate to try to make a profit. The lowest risk and most common type of credit card arbitrage entails taking advantage of
