Common use of Credit Risk Clause in Contracts

Credit Risk. The risk that the government, entity or company that issued the bond will run into financial difficulties and will not be able to pay the interest, or repay the principal, at maturity. Credit risk applies to debt investments such as bonds. You can evaluate credit risk by looking at the credit rating of the bond. For example, long-term UK government bonds have a credit rating of AA, which indicates the second lowest possible credit risk.

Credit Risk. The risk that the government, entity or company that issued the bond will run into financial difficulties and will not be able to pay the interest, or repay the principal, at maturity. Credit risk applies to debt investments such as bonds. You can evaluate credit risk by looking at the credit rating of the bond. For example, long-term UK government bonds tend to have a credit rating of AA, which indicates the second lowest possible credit risk.