Credit Risk
[kred-it risk] n. The risk to a lender that a debtor will fail to repay a debt.
As is the case in any for-profit businesses, banks and other lenders strive to make money. They do this by providing loans to debtors in exchange for a repayment that exceeds the amount of the original loan.
Of course, in order to make money, lenders need debtors to repay their loans. This is why lenders will deny credit to consumers with a very high credit risk. There is too great a chance that they will not make money from the transaction.
In cases where there is only a moderate credit risk, however, lenders will still extend credit but they will charge a higher interest rate to offset their risk. From the lenders perspective, they are willing to extend credit to 10 people where there is a 1 in 10 chance one of the debtors will default on the loan if they know the additional interest paid by the other 9 debtors will make up for the loss.Unfairly paying for
This system works out well for lenders because they still profit, but if you are one of the 9 people who pay back your entire loan, you are basically paying for your loan plus one ninth of the outstanding debt from the debtor who did not. This is the penalty the 9 people in the example receive for being labeled as a high credit risk.
To make matters worse, many people are falsely classified as being a high credit risk because of inaccurate or misleading negative items in their credit reports. Lexington Law helps clients legally dispute these questionable negative items in an effort to show lenders a more accurate representation of your credit risk.
The cost of bad credit - online calculator
As is the case in any for-profit businesses, banks and other lenders strive to make money. They do this by providing loans to debtors in exchange for a repayment that exceeds the amount of the original loan.
Of course, in order to make money, lenders need debtors to repay their loans. This is why lenders will deny credit to consumers with a very high credit risk. There is too great a chance that they will not make money from the transaction.
In cases where there is only a moderate credit risk, however, lenders will still extend credit but they will charge a higher interest rate to offset their risk. From the lenders perspective, they are willing to extend credit to 10 people where there is a 1 in 10 chance one of the debtors will default on the loan if they know the additional interest paid by the other 9 debtors will make up for the loss.
Unfairly paying for
the credit risk of others?
This system works out well for lenders because they still profit, but if you are one of the 9 people who pay back your entire loan, you are basically paying for your loan plus one ninth of the outstanding debt from the debtor who did not. This is the penalty the 9 people in the example receive for being labeled as a high credit risk.
To make matters worse, many people are falsely classified as being a high credit risk because of inaccurate or misleading negative items in their credit reports. Lexington Law helps clients legally dispute these questionable negative items in an effort to show lenders a more accurate representation of your credit risk.
More information about credit risk
FAQ: How much bad credit does it take to be denied credit?The cost of bad credit - online calculator
Client Results
As the leading firm in credit report repair, Lexington Law assists our clients in the removal of over a thousand questionable items from credit reports every single day.What kind of questionable negative items can be removed from reports?
Listed below is a partial list of the types and number of items our clients removed last quarter:**Bankruptcy
2,186
Charge Off
29,700
Collection
73,827
Foreclosure
678
Incl. in Bankruptcy
10,237
Judgment
6,928
Late Payment
38,128
Lien
4,236
Repossession
1,170
Settlement Accepted
4,029
*Important: While the testimonials and other information on this website may be exciting, Lexington Law promises only to perform the steps we've agreed to in each client's case and to charge each month only for steps already completed. As with any legal work, no outcome is promised. Your results may vary.
“My experience with the Lexington Law Firm has been wonderful from beginning to end and the results you achieved are remarkable.
It is also noteworthy, that the fee I paid for such superior professional service must be one of the truly great bargains of all time.
My warmest best wishes to you all.”
— R.S., Lexington client*
(Your results may vary)
— R.S., Lexington client*
(Your results may vary)
© 2009 Lexington Law™ All rights reserved. John C. Heath, Attorney at Law, PLLC. The services of Lexington and its affiliates may not be available in all states. Lexington Law is a group of law firms that may also be referred to throughout this site as "Lexington," "Lexington Law Firm," "we," "us," or "the firms". The number of items removed represents the combined results of the group. Terms of Use were last updated on 02/24/2006. Privacy Policy was last updated on 02/24/2006. // 1.0.1