What Is a Credit-Linked Note? A credit-linked note (CLN) is a security with an embedded credit default swap permitting the issuer to shift specific credit risk to credit investors. Credit-linked notes are created through a special purpose vehicle (SPV), or trust, which is collateralized with AAA-rated securities. Investors buy credit-linked notes from a trust that
What Is a Credit Mix? Credit mix refers to the types of accounts that make up your credit report. Credit mix determines 10% of your FICO score. The different types of credit that might be part of your credit mix include credit cards, student loans, automobile loans, and mortgages. Credit mix might have a larger
What Is Credit Money? Credit money is monetary value created as the result of some future obligation or claim. As such, credit money emerges from the extension of credit or issuance of debt. In the modern fractional reserve banking system, commercial banks are able to create credit money by issuing loans in greater amounts than
What Is a Credit Monitoring Service? A credit monitoring service tracks changes in borrower behavior to notify consumers of potential fraud, as well as changes to their creditworthiness. For example, credit monitoring services can guard against identity theft, when an individual’s personal information is stolen and used without the person’s permission for nefarious purposes. If
What Is Credit Muling? Credit muling is a type of credit fraud that involves acquiring or delivering items that were obtained using credit. A common example of credit muling involves the resale of cell phones that were obtained for discounted rates as part of a multi-year contract with a telecommunications provider. Key Takeaways Credit muling
What Is Credit Netting? Credit netting is a practice common among large financial firms. It consists of consolidating a series of financial transactions and agreeing to carry out a single credit check that relates to the entire bundle of transactions. In this sense, the transactions are effectively combined, or “netted together.” This practice is common
What Is a Creditor? A creditor is an individual or institution that extends credit to another party to borrow money usually by a loan agreement or contract. Creditors are commonly classified as personal or real. Those who loan money to friends or family or a business that provides immediate supplies or services to a company
What Is Creditor Nation? A creditor nation has positive net international investment position (NIIP) after reconciling all of the financial transactions completed between it and the rest of the world. Simply put, it has a cumulative balance of payment surplus. Key Takeaways Creditor nations are those that lend more money to the world than they borrow
What Is Credit Quality? Credit quality is a measurement of an individual’s or company’s creditworthiness, or the ability to repay its debt. Credit quality is an indicator of credit risk. Credit quality is also one of the principal criteria used for judging the investment quality of a bond or a bond mutual fund. The credit quality
What Is a Credit Rating? The term credit rating refers to a quantified assessment of a borrower’s creditworthiness in general terms or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money—an individual, a corporation, a state or provincial authority, or a
