Credit Event

DEFINITION of 'Credit Event'

Any sudden and tangible (negative) change in a borrower's credit standing or decline in credit rating. A credit event brings into question the borrower's ability to repay its debt. It is the defining trigger in a credit derivative contract, or credit default swap. If the borrower experiences a credit event, then the buyer of the contract must pay the seller an agreed-upon sum to cover the loss.

BREAKING DOWN 'Credit Event'

Credit events include bankruptcies or violating a bond indenture or other loan agreement. Any decline in the borrower's credit rating can trigger the swap. Credit events always refer to the condition of the borrower pertaining to the underlying asset and not to either the lender or the purchaser of the swap.

RELATED TERMS
  1. Credit Rating

    An assessment of the creditworthiness of a borrower in general ...
  2. Credit Exposure

    The total amount of credit extended to a borrower by a lender. ...
  3. Credit Limit

    The amount of credit that a financial institution extends to ...
  4. Credit Derivative

    Privately held negotiable bilateral contracts that allow users ...
  5. Good Credit

    A qualification of an individual's credit history that indicates ...
  6. Credit Analyst

    A financial professional who has expertise in evaluating the ...
Related Articles
  1. Personal Finance

    Revolving Credit vs. Line of Credit

    Revolving credit and a line of credit are arrangements made between a lending institution and a business or individual.
  2. Investing

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  3. Investing

    How To Increase Your Appeal To Prospective Lenders

    Making a business eligible for loans/credit cards at the best possible rates requires crafting an excellent credit profile through the smart use of credit.
  4. Investing

    Understanding Credit

    Credit has three common meanings in the financial world.
  5. Markets

    Small Business Loan Vs Line of Credit: How They Differ

    Understand the differences between a small business loan and a line of credit, and learn some of the most appropriate uses for each form of financing.
  6. Markets

    Time to Accept Credit Card Offers Again?

    How much you could get and whether to respond
  7. Personal Finance

    Use Your Credit Card To Boost Your Credit Score

    Misusing credit cards can blow your credit – but using them well can boost your score. How to grow a history, fix bad credit, make good credit even better.
  8. Personal Finance

    Use Your Credit Card to Improve Your Credit Score

    Responsible credit card use can provide a convenient boost to your credit score.
  9. Personal Finance

    A Quick Way to Boost Your Credit Score

    The easiest technique ever for raising your credit score. Why don't more people use it?
  10. Investing

    Millennials: Prevent a Bad Credit Score

    Here are five ways to help prevent getting a bad credit score that could affect future loan, credit card or mortgage approvals.
RELATED FAQS
  1. What is the difference between bad credit and no credit?

    The answer to this question will depend on what information (if any) is found on your credit report, such as any bankruptcy ... Read Answer >>
  2. What are some good alternatives to taking out a line of credit?

    Read more about how opening a line of credit might not be the best answer for you and determine available alternatives if ... Read Answer >>
  3. What are the benefits of credit ratings?

    Credit ratings are an important tool for borrowers to gain access to loans and debt. Good credit ratings allow borrowers ... Read Answer >>
  4. Is it possible to have a credit limit that's too high?

    Avoid these pitfalls when working with high credit limits, and learn how to increase your credit score by increasing your ... Read Answer >>
  5. What is the difference between a loan and a line of credit?

    Learn to differentiate between lines of credit and standard loans, and determine when you are likely to use each method of ... Read Answer >>
  6. What is the difference between available credit and credit limit?

    Explore the difference between available credit and credit limit and the implications different account balances have on ... Read Answer >>
Hot Definitions
  1. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  2. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  3. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  4. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  5. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
  6. Security

    A financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship ...
Trading Center