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This picture shows how credit score ratings are generally calculated. As you can see, the majority of it is calculated from your payment history. That meaning how often you paid off credit and whether you were on time making payments.

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This image signifies what your credit score rating means. The higher your credit score rating is, the better for you. Your credit score is based off payment history, credit history, credit utilization and type of credit you already have.

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Hello everyone and welcome to my padlet wall! Throughout my page, you will be learning about credit ratings. By reading this, you will hopefully be able to define credit score, what goes in to analysing your credit score, and how to obtain and maintain an excellent credit score rating. I hope you enjoy reading and learn something new about credit score ratings and the analysis of it!

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What surprised me the most about this topic is the different factors that make up your credit score ratings. Each factor carries a different weight that will determine what your rating will be. For example, one of the greatest factors affecting credit score would be payment history which accounts for roughly 1/3 of the calculations.

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This topic relates to me because I have a line of credit, which is my credit card. I have learned to be responsible in paying off my credit card balances by the time it is due or be able to make minimum payments.

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If I were to pass on this information to someone I know, I think the most important thing to share is to check and review your credit report frequently so you can keep track as to what is affecting your credit score and how it can be approved. Another thing I would also share is that it is never too early to begin looking at how you can open a line of credit, and how you can obtain and maintain a great credit score rating.

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It is important to start building your credit as soon and as early as possible. A credit score rating report shows how efficiently and how well you can meet your financial commitments.  Some factors a credit report will list are the size of the loans you take out, debt payments and other payments, and a list of any late payments. A credit score rating is based on the payment habits and frequency of payments, the final amount of the debts you have accrued, and the type of credit lines you have open.

One thing I learned from this video that stands out is that the amount of times you have applied for a credit line shows on your report and can reflect poorly on you and deny you a line of credit

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How do you build a good credit history in Canada?

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This video goes into more depth on the factors of credit score ratings. The payment history consists of whether or not you are late or on time with your credit payments. Another thing looked at for your payment history is the number of debt collections you have acquired in the past. The video also describes the length of you credit histories, if you are applying for any new credits, and any outstanding amounts you owe on your credit lines.

One thing that stood out to me from watching this video is that the best time to check your credit score is when you are considering making a big purchase, such as a house or car. While your credit ratings do not need to be checked every month per se, it is good to check frequently enough to make sure you are maintaining a good rating.

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Credit Score Tips & Advice Canada - Top Things You Need to Know About Your Credit Score

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This video explains the different credit companies you may be under and how it affects you. This video gives names of credit bureaus such as Fico and Vantage and how each of these analyze and consider a person to have good or bad credit. For the most part, most companies show that any credit score rating of 725-759 is seen as a very good score and a rating of over 760 is seen as excellent.

What was unique in this video that stood out to me from the other videos is the weight that your payment history has that affects your credit score ratings. It is vital for anyone with a lien of credit to make sure that there any payments to be made are made on time so there is no outstanding balance or interest accrued.

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This video is basically restating what has been said in most videos. In summary, this video says the good way of thinking is “numerical measure of how good of an idea it is to lend your money.” Again, each factor of credit analysis holds different weights, but there are specific factors that are hidden from the public. Some credit bureaus look at a ratio called debt-to-income ratio, which shows how much debt you pay off each month vs. the amount of money you are earning.

I learned that it is good to keep your ratio under 43%. Unlike your credit score, a lower percentage is better according to this ratio.

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Credit files are collections of the information held on all of your credit accounts that are sent to credit bureaus.

Information included within credit files are balances, limits, payment history, etc. Personal information such as your name, address, age, social insurance number, occupation, martial status, and more are also included for identification.

-In Canada, credit scores are ranked on a point system ranging from 300 to 900. According to many credit bureaus, a score of 650 is entitled for many standard loans towards a person. The lower your score gets, the limited number of opportunities provided by your lender, the same applies to the opposite end of the spectrum.

The negative effects of a lower credit score include success within applying for a loan, employment, purchasing or renting a vehicle or house.

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Credit Rating 101 - Debt Canada: Your Canadian Credit Education Centre

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We have collected information from both of the consumer reporting agencies (credit bureaus), as well as our own research to try to provide a full picture on credit files and credit scores, including those little known "insider" secrets.

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This website explains defines what your credit report is.  A credit report is a summary of your financial activity and obligations through your lines of credit. A credit score is a number that is based on the information (5 main factors) on your credit report. This website gives tips on how to improve your credit score.

One thing that stood out to me in this website is that there is essentially no “quick fix” for a credit score rating. Your credit score rating is a build up over a period of time that will have a long=lasting impression on your credit report.

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Do you wonder what a credit score is and how your credit score is calculated? Well wonder no more.

Here we'll answer some of the questions we hear most often, including:

What is a Credit Report?

A credit report is a summary of how you pay your financial obligations. It contains information based on what you have done in the past. Lenders use it to verify information about you, see your borrowing activity and find out about your repayment history. Some of the information on your credit report is used to determine your credit score.

What is a Credit Score?

Your credit score is a number, based on specific information on your credit report. Your credit score is used by lenders to predict the likelihood that you will repay future debt. Your credit score changes frequently and it is up to each lender how they interpret and use your credit score.

What Does a Credit Score Mean?

A credit score is a number which can range from a low near 300 to a high of 850 or 900 (depending on which company is calculating the score).

If someone's score is 580, it means that "580 people out of 850 are likely to repay their debt." If someone's score is 780, it means that "780 people out of 850 are likely to repay their debt."

The number represents the odds that a lender will get the money back that they lend someone. The higher the number, the better the odds.

5 Key Factors in Calculating and Determining Your Credit Score

A number of specific factors go into determining a credit score. These factors are based on what someone does or doesn't do with the credit they already have available. That is why the score changes frequently. Here are the 5 factors that determine your credit score:

1. Payment History (35%)

Your payment history is the most important factor in your credit score. Creditors want to know if you are going to pay them back the money you are asking to borrow from them.

Your payment history reflects all the payments you make to all of your consumer debts. Creditors report every time you make a payment to your credit cards, line of credit, car loan, personal loan, student loan, cell phone on contract and any other regular debts you have. Mortgage payments are not reflected on a credit report, but almost everything else is.

The payment information that is reported shows separately for each account you have. It shows whether or not you've paid as agreed, it shows if it is a deferred payment plan or if payments aren't currently required (like for a student loan), how many past due payments you have, how often your payments have been late, if you have any debts in collections and if you have any negative information in the public records portion of your credit report (bankruptcy, judgments, liens, etc.).

Your score also reflects how recent any late payments or collection activities are. The older the information gets, the less it will impact your score.

2. How Much is Owed (30%)

When you apply for credit, how much you already owe really matters to a lender. Your current payments will determine if you can manage any more payments in your budget for the additional money you borrow.

While you might think that you can handle more credit, statistically speaking, there's a chance you might not be able to. If you are close to maxing out all of your credit cards or your line of credit, it means that you are a higher risk to lenders. Higher risk to a lender means that there's a greater chance that you won't keep up with your payments.

Another aspect of this part of your credit score reflects how much of your available credit limits you use on an ongoing basis. If you usually use 60% or more of your credit limit on a credit card or line of credit, it will impact your credit score negatively. This is because if something were to happen to your income and you owe a lot of money, you would find yourself struggling to keep up with payments.

3. Length of Credit History (15%)

If you have had credit available to you for a long time, your credit report should provide an accurate picture of how you use credit and if you had one, how you got through a difficult time. For someone who has not used credit for very long time, it is difficult to tell if they really know how to use credit responsibly.

Good or bad, most information will be automatically removed from someone's credit report after 6 - 7 years, so the only way to keep a credit report active, is to use credit, at least very minimally, on an ongoing basis.

Time is needed to get a true picture of how responsible someone is with credit. This is why the length of your credit history is the third most important factor in your credit score calculation.

Your score will reflect how long it has been since you first obtained credit, how long each item on your credit report has been reporting and whether or not you are actively using credit right now.

If you have recently obtained credit for the first time, your credit score will not be very strong. However, if you have been using credit responsibly for many years, this factor can work in your favour.

If you have been involved in a bankruptcy, consumer proposal, orderly payment of debt or debt management program, your credit history will essentially restart whenever you complete your program.

4. New Credit Applications (10%)

Frequently applying for new credit can signal financial difficulty. In the industry it's called "credit shopping" and it does not reflect favourably on someone's credit score.

It is not unreasonable for a creditor to worry about how often someone applies for new/more credit because the more new credit someone gets, the harder it becomes for them to keep up with all of their payments.

This part of your credit score takes into account the number of times your credit has been checked in the last 5 years, the number of credit accounts you have recently opened, how much time has passed since you opened any new accounts and the time since your most recent credit inquiries. This part of your credit score will also evaluate whether or not you are re-establishing your credit history following past payment problems.

5. Types of Credit Used (10%)

Even though this part of your credit score makes up 10% of the total, it is the least significant part, unless you don't have much other information on your credit report.

Different types of credit shed light on how you handle your money overall. For example, deferred interest or payment plans can indicate that you aren't able to save up for purchases ahead of time. Consolidation loans mean that you've had difficulty paying your debts in the past. A line of credit is a revolving form of credit, like a credit card, and it's easier to get into trouble with a revolving form of credit than with an installment loan where you make payments for a set amount of years and then it's paid in full.

If you focus on managing your finances wisely and only apply for credit as you need it, this part of your score should take care of itself.

Other Factors

The factors outlined above are calculated slightly differently by the two credit bureau companies in Canada, Equifax and TransUnion, and it is up to each lender to decide how they interpret and use credit scores and credit report information.

As such, the factors above are not the only things that are important when you apply for credit. Lenders will also consider factors such as your income, your assets, how long you have been at your job and the reason why you are applying for credit.

Is Knowing Your Own Credit Score Important?

Some people really want to know what their credit score is. However, it changes often, so be prepared. Also, keep in mind that your credit score is intended to reflect the likelihood that you will repay any money that you borrow. Most people don't need a score to know if they will pay themselves back the money they lend themselves.... Instead, focus on managing your money carefully with a budget and only apply for credit that you need; your score will take care of itself.

Getting a copy of your credit report, however, is important and can be done for free. It will allow you to spot concerns, inaccuracies, or potential fraud.

If You Want to Get Your Credit Score

To find out what your credit score is, you can request it from Equifax and Trans Union, for a fee. If you don't want to pay for it, you can try this credit score estimator to get a rough idea of what your credit score might be.

How to Improve Your Credit Score

The best things you can do to improve your credit score are to manage your money wisely using a realistic spending plan and to deal with your debts. Despite what some might claim, there is no quick-fix for factual but negative information on your credit report. Time and living within your means are what it takes to improve your credit rating. However, in some situations there may be a couple of things you can do to improve your score more quickly.

Related articles:
For more detailed information about credit reporting and what everything on a credit report printout means, take a look at this easy-to-read government resource, " Understanding Your Credit Report and Credit Score."

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What is a Credit Score & How is a Credit Score Calculated in Canada?

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Do you wonder what a credit score is and how your credit score is calculated? Well wonder no more. Here we'll answer some of the questions we hear most often, including: A credit report is a summary of how you pay your financial obligations. It contains information based on what you have done in the past.

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In all honesty, most websites, videos, and blogs about credit ratings and what goes into the analysis of credit score ratings reiterate the same thing. This website says that a credit score rating is a three-digit number that is defined by an algorithm of information from a credit report.

The one thing that stood out to me in this website article is that the factor of new credit and types of credits used are the least weighted factors in analysing your credit history. Those two combined only make up for about 20% of the analysis. The types of credit accounts used in past and present are looked at, such any installments.

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Data from your credit report goes into five major categories that make up a FICO score. The scoring model weighs some factors more heavily, such as payment history and debt owed.

Payment history: (35 percent) -- Your account payment information, including any delinquencies and public records.

Amounts owed: (30 percent) -- How much you owe on your accounts. The amount of available credit you're using on revolving accounts is heavily weighted.

Length of credit history: (15 percent) -- How long ago you opened accounts and time since account activity.

Types of credit used: (10 percent) -- The mix of accounts you have, such as revolving and installment.

New credit: (10 percent) -- Your pursuit of new credit, including credit inquiries and number of recently opened accounts.

Personal or demographic information such as age, race, address, marital status, income and employment don't affect the score.
Different score impact for same missteps
How much does a specific change affect a credit score? The answer is usually "it depends," and for good reason. Credit score developers don't reveal the exact point deductions. The weight of any given activity can also vary for different credit histories.

Within a scoring model there's more than one formula used to calculate a score, and each formula is designed for a category of consumers with similar credit profiles. The information in your credit report determines which formula is used. If you are new to credit, for instance, the scoring model will put you into a category for people with young credit histories, and use a scoring formula specific to that group. Such groups are called scorecards. Within that group, recent inquiries may cost more points than they would for a different group.
How to check your credit score
Federal law mandates the consumer's right to a free credit report annually from each credit reporting agency, but not to a free credit score. Use our FICO score estimator to get your score range free of charge. To get your exact number, you have to purchase it from a score provider, such as myFICO.com or one of the reporting agencies.

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Data from your credit report goes into five major categories that make up a FICO score. The scoring model weighs some factors more heavily, such as payment history and debt owed. Payment history: (35 percent) -- Your account payment information, including any delinquencies and public records.

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It is important to note that credit analysts search for the potential dangers of lending money to a bank's client. This piece of information is applied to one's credit score, which is used to find their ability to pay back the loan. Credit analysts look for five factors in a client, these include one's character, capacity, capital, collateral, and conditions.

 The vital factor many analysts review in one's statement is their character. Credit analysts base your trustworthiness partly on experience levels, background, and various other sources that can be used to determine this factor. After looking at your character, the decisions are made.

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Credit Analysis Definition

Credit analysis is a process of drawing conclusions from available data (both quantitative and qualitative) regarding the creditworthiness of an entity, and making recommendations regarding the perceived needs, and risks. Credit Analysis is also concerned with the identification, evaluation, and mitigation of risks associated with an entity failing to meet financial commitments.

Credit Analysis Process

The below diagram shows the overall Credit Analysis Process.

What does a Credit Analyst look for?

In layman terms, Credit analysis is more about the identification of risks in situations where a potential for lending is observed by the Banks. Both quantitative and qualitative assessment forms a part of the overall appraisal of the clients (company/individual). This, in general, helps to determine the entity's debt-servicing capacity or its ability to repay.

Ever wondered why bankers ask so many questions and make you fill so many forms when you apply for a loan. Don't some of them feel intrusive and repetitive, and the whole process of submission of various documents seems cumbersome. You just try to fathom as to what they do with all this data and what they are actually trying to ascertain! It is definitely not only your deadly charm and attractive personality that makes you a good potential borrower; obviously, there is more to that story. So here, we will try to get an idea about what exactly a Credit Analyst is looking for.

The 5 C's of Credit Analysis

Character

This is the part where the general impression of the protective borrower is analyzed. The lender forms a very subjective opinion about the trustworthiness of the entity to repay the loan. Discrete inquiries, background, experience level, market opinion, and various other sources can be a way to collect qualitative information, and then an opinion can be formed, whereby he can make a decision about the character of the entity.

Capacity

Capacity refers to the ability of the borrower to service the loan from the profits generated by his investments. This is perhaps the most important of the five factors. The lender will calculate exactly how the repayment is supposed to take place, cash flow from the business, the timing of repayment, probability of successful repayment of the loan, payment history, and such factors, are considered to arrive at the probable capacity of the entity to repay the loan.

Capital

Capital is the borrower's own skin in the business. This is seen as proof of the borrower's commitment to the business. This is an indicator of how much the borrower is at risk if the business fails. Lenders expect a decent contribution from the borrower's own assets and personal financial guarantee to establish that they have committed their own funds before asking for any funding. Good capital goes on to strengthen the trust between the lender and the borrower.

Collateral (or Guarantees)

Collateral is a form of security that the borrower provides to the lender to appropriate the loan in case it is not repaid from the returns as established at the time of availing the facility. Guarantees, on the other hand, are documents promising the repayment of the loan from someone else (generally family member or friends), if the borrower fails to repay the loan. Getting adequate collateral or guarantees as may deem fit to cover partly or wholly the loan amount bears huge significance. This is a way to mitigate the default risk. Many times, Collateral security is also used to offset any distasteful factors that may have come to the forefront during the assessment process.

Conditions

Conditions describe the purpose of the loan as well as the terms under which the facility is sanctioned. Purposes can be Working capital, purchase of additional equipment, inventory, or for long term investment. The lender considers various factors, such as macroeconomic conditions, currency positions, and industry health, before putting forth the conditions for the facility.

Credit Analysis Case Study

From times immemorial, there has been an eternal conflict between entrepreneurs/businessmen and bankers regarding the quantification of credit. The resentment on the part of the business owner arises when he believes that the banker might not be fully appreciating his business requirements/needs and might be underestimating the real scale of opportunity that is accessible to him, provided he gets a sufficient quantum of loan. However, the credit analyst might be having his own reasons to justify the amount of risk he is ready to bear, which may include bad experiences with that particular sector or his own assessment of the business requirements. Many times there are also internal norms or regulations which force the analyst to follow a more restrictive discourse.

The most important point to realize is that banks are in the business of selling money, and therefore risk regulation and restraint are very fundamental to the whole process. Therefore, the loan products available to prospective customers, the terms and conditions set for availing the facility, and the steps taken by the bank to protect its assets against default all have a direct forbearance to the proper assessment of the credit facility.

So, let's have a look at what does a loan proposal looks like:

The exact nature of proposals may vary depending on subsequent clients, but the elements are generally the same.
**To put things into perspective, let's consider the example of one Sanjay Sallaya, who is credited to being one of the biggest defaulters in recent history, along with being one of the biggest businessmen in the world. He owns multiple companies, some sports franchises, and few bungalows in all major cities.

1. Who is the client? Ex. Sanjay Sallaya, a reputed industrialist, owning majority share in XYZ ltd., and some others.

2. Quantum of credit they need and when? Ex. Starting a new airline division, which would cater to the high-end segment of society. Credit demand is $25 mil, needed over the next 6 months.

3. The specific purpose the credit will be employed for? Ex. Acquiring new aircraft and capital for day to day operations like fuel costs, staff emoluments, airport parking charges, etc.

4. Ways and means to service the debt obligations (which include application and processing fees, interest, principal, and other statutory charges) Ex. Revenue generated from flight operations, freight delivery, and freight delivery.

5. What protection (collateral) can the client provide in the event of default? Ex. Multiple bungalows in prime locations are offered as collateral, along with the personal guarantee of Sanjay Sallaya, one of the most reputed businessmen in the world.

6. What are the key areas of the business, and how are they operated and monitored? Ex. Detailed reports would be provided on all key metrics related to the business.

Answers to these questions help the credit analyst to understand the broad risks associated with the proposed loan. These questions provide the basic information about the client and help the analyst to get deeper into the business and understand any intrinsic risks associated with it.

Credit Analyst - Obtaining Quantitative Data from the Clients

Other than the above questions, the analyst also needs to obtain quantitative data specific to the client:

Borrower's history - A brief background of the company, its capital structure, its founders, stages of development, plans for growth, list of customers, suppliers, service providers, management structure, products, and all such information are exhaustively collected to form a fair and just opinion about the company.

Market Data - The specific industry trends, size of the market, market share, assessment of competition, competitive advantages, marketing, public relations, and relevant future trends are studied to create a holistic expectation of future movements and needs.

Financial Information - Financial statements (Best case/ expected case/ worst case), Tax returns, company valuations and appraisal of assets, current balance sheet, credit references, and all similar documents which can provide an insight into the financial health of the company are scrutinized in great detail.

Schedules and exhibits - Certain key documents, such as agreements with vendors and customers, insurance policies, lease agreements, picture of the products or sites, should be appended as exhibits to the loan proposal as proofs of the specifics as judged by the above-mentioned indicators.

**It must be understood that the credit analyst, once convinced, will act as the client's advocate in presenting the application to the bank's loan committee and also guiding it through the bank's internal procedures. The details obtained are also used to finalize the loan documentation, terms, rates, and any special covenants which need to be stipulated, keeping in mind the business framework of the client as well the macroeconomic factors.

Credit Analysis - Judgement

After collating all the information, now the analyst has to make the real "Judgement" regarding the different aspects of the proposal, which will be presented to the sanctioning committee:

Loan - After understanding the need of the client, one of the many types of loans, can be tailored to suit the client's needs. Amount of money, the maturity of the loan, expected use of proceeds can be fixed, depending upon the nature of the industry and the creditworthiness of the company.

Company - The market share of the company, products, and services offered, major suppliers, clients, and competitors, should be analyzed to ascertain its dependence on such factors.

Credit History - Past is an important parameter to predict the future. Therefore, keeping in line with this conventional wisdom, the client's past credit accounts should be analyzed to check any irregularities or defaults. This also allows the analyst to judge the kind of client we are dealing with by checking the number of times late payments were made or what penalties were imposed due to non-compliance with stipulated norms.

Analysis of market - Analysis of the concerned market is of utmost importance as this helps us in identifying and evaluating the dependency of the company on external factors. Market structure, size, and demand of the concerned client's product are important factors that analysts are concerned with.

Credit Analysis Ratios

A company's financials contain the exact picture of what the business is going through, and this quantitative assessment bears the utmost significance. Analysts consider various ratios and financial instruments to arrive at the true picture of the company.

1. Liquidity ratios - These ratios deal with the ability of the company to repay its creditors, expenses, etc. These ratios are used to arrive at the cash generation capacity of the company. A profitable company does not imply that it will meet all its financial commitments.

2. Solvability ratios - These ratios deal with the balance sheet items and are used to judge the future path that the company may follow.

3. Solvency ratios - Solvency ratios are used to judge the risk involved in the business. These ratios take into the picture the increasing amount of debts, which may adversely affect the long term solvency of the company.

4. Profitability ratios - Profitability ratios show the ability of a company to earn a satisfactory profit over a period of time.

5. Efficiency ratios - These ratios provide insight into the management's ability to earn a return on the capital involved, and the control they have on the expenses.

6. Cash flow and projected cash flow analysis - Cash flow statement is one of the most important instruments available to a Credit Analyst, as this helps him to gauge the exact nature of revenue and profit flow. This helps him get a true picture of the movement of money in and out of business.

7. Collateral analysis - Any security provided should be marketable, stable, and transferable. These factors are highly important as a failure on any of these fronts will lead to complete failure of this obligation.

8. SWOT analysis - SWOT Analysis is again a subjective analysis, which is done to align the expectations and current reality with market conditions.

If you wish to learn more about financial analysis, then click here for this amazing Financial Statement analysis guide.

Credit Rating

A credit rating is a quantitative method using statistical models to assess creditworthiness based on the information of the borrower. Most banking institutions have their own rating mechanism. This is done to judge under which risk category the borrower falls. This also helps in determining the term and conditions and various models use multiple quantitative and qualitative fields to judge the borrower. Many banks also use external rating agencies such as Moody's, Fitch, S&P, etc. to rate borrowers, which then forms an important basis for consideration of the loan.

Lesson Learned - Mr. Sanjay Sallaya

So, let's illustrate the whole exercise with the help of an example of Mr. Sanjay Sallaya, who is a liquor Barron and a hugely respected industrialist, who also happens to own a few sports franchises and has bungalows in the most expensive locals. He now wants to start his own airline and has therefore approached you for a loan to finance the same.

The loan is for a meager $1 million. So, as a credit analyst, we have to assess whether or not to go forward with the proposal. To begin, we will obtain all the required documents which are needed to understand the business model, working plan, and other details of his new proposed business. Necessary inspection and enquires are undertaken to validate the veracity of his documents. A TEV, i.e., Techno-Economic Viability, can also be undertaken to get an opinion from the experts in the aviation industry about the viability of the plan.

When we are finally satisfied with the overall efficacy of the plan, we can discuss the securities that will collaterally cover our loan (partly/fully). Mr. Sanjay Sallaya being a well-established industrialist, holds a good reputation in the business world and, therefore, will hold good recommendations. Such a proposal, if it meets all other aspects, can be presented for sanction, comfortably, and generally enjoys good terms from the bank's side as the risk associated with such personalities is always assessed to be less.

Therefore, to conclude, Mr. Sanjay Sallaya will get a loan of $1 million approved and will go on to start his airline business. However, what the future holds can never be predicted when a loan is sanctioned.

also, check out the difference between Equity Research vs. Credit Research

Conclusion

Credit Analysis is about making decisions keeping in mind the past, present, and future. As a Credit analyst, two days in life are never the same. The role offers a plethora of opportunities to learn and understand different types of businesses as one engages with a multitude of clients hailing from different sectors. Not only is the career monetarily rewarding, but it also helps an individual grow along with providing good opportunities to build one's career.

Recommended Articles

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Credit Analysis | What Credit Analyst Look for? 5 C's | Ratios

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Credit analysis is a process of drawing conclusions from available data (both quantitative and qualitative) regarding the creditworthiness of an entity, and making recommendations regarding the perceived needs, and risks. Credit Analysis is also concerned with the identification, evaluation, and mitigation of risks associated with an entity failing to meet financial commitments.