If so, did these analyses actually conclude that the USSR was a good credit risk in December 1990 when just four months later they are transparently not one?
Importantly, these bets provide a liquid market for credit risk, which lowers the cost of hedging for those with primary exposure, and provides the market with better information about whether Greece or General Electric is a good credit risk.
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Mr. HENDRICKS: Theoretically, if they come out with a better model that dissects you more as a consumer and gives them more precision in figuring out whether you're a good credit risk, that's what would be in it for them.
That person takes the risk off of my shoulders so I don't really have to care whether or not you're a good credit risk because they've taken the risk off my shoulders, and in turn, they will make the money off of you paying the interest on the mortgage.
Banks, Kaufer says, use similar descriptive analysis to determine if you're a good or bad credit risk.
Moreover, companies boasting good credit still borrow when risk flows freely while less worthy borrowers obtain credit after underwriting spigots tighten.
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The three major credit reporting agencies, Equifax, Trans-Union and Experian, collect similar information to help businesses answer a basic question: Is the loan or credit applicant a good risk?
The three major credit reporting agencies, Equifax (nyse: EFX - news - people ), Trans-Union and Experian, collect similar information to help businesses answer a basic question: Is the loan or credit applicant a good risk?
Most of these offers are going to cardholders with good or excellent credit scores since they represent less risk of defaulting.
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For example, we could increase the duration of our investment portfolio, we could go out and buy a lot of securities that have good short-term yield but have higher credit risk.
If you do need credit, there will be a premium on having a good credit score since lenders will be more hesitant to extend credit to those who are seen as more of a risk.
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Leaving aside problems such as falling international credit ratings and rising interest rates, there is a risk that even the good bits will not be delivered.
But keeping these debts on their books, and so continuing to favour existing long-term but often poor-risk customers, is choking off bank credit to those firms which could actually make good use of it.
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