Credit Exposure
Are you young? Do you have bad credit? Here's why you'll have a hard time getting a loan.
You go to a bank to borrow $10,000 to start a business. Your credit rating is 550. Not good. You're a serious default risk. Why on earth did you max out your first credit card on auction websites?
The bank doesn't want to give you ten grand. Because that loan is considered the “credit exposure” that the bank faces. This is the total amount of default risk you present to the borrower. They'd much rather have someone who has a 790 credit score with a strong repayment history. They're going to get the $10,000. You're going to get...a pep talk.
Credit exposure fluctuates. As a borrower pays off the loan, the credit exposure will match the remaining balance. Lenders may choose to reduce their credit exposure by hedging on different loans or using financial instruments, like credit swaps.
The general rule of lending is to have high credit exposure to creditworthy individuals with a low default risk. Banks may make attractive lending offers to individuals with high credit scores in order to diversify their credit exposure.
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Finance: What is the Equal Credit Opport...6 Views
Finance a la shmoop what is the Equal Credit Opportunity Act? alright people while the
federal government thinks everyone should have the equal opportunity to get [Men in Federal Government appear]
into debt isn't that sweet of them you know that Uncle Sam well he sure does
have a heart of gold this federal law makes it illegal to discriminate against
people who are applying for financing on pretty much anything legal based on
their age gender marital status religious affiliation ethnic or national
background or public assistance benefits your credit score however well that
still matters sorry just keeping it real
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