Default risk is the chance that companies or individuals will be unable to pay their debts. Lenders and investors face default risk in virtually all forms of credit extensions.For example, the chance that a financial institution, such as a bank, may collapse and be unable to return principal and/or interest payments is the default risk its investors take, although that risk is low. Companies that extend credit to individual consumers, such as credit cards, car loans and mortgages face far higher default risk. Factors that influence corporate default risk include rising interest rates, market changes – like regulatory or technological changes -- and a corporation’s falling cash rate. Consumer default risk is usually determined by income and job stability. Most lenders charge rates of return that reflect a debtor’s level of default risk. And investors who buy bonds demand a higher return from lenders that offer a higher default risk. The U.S. government backs the bonds it issues, making them the safest bonds investors can buy. U.S. Treasury bonds are considered immune from default risk. Meanwhile, corporate bonds pose a higher default risk because corporations can go bankrupt. Standard & Poor’s, Moody’s and Fitch issue credit ratings to measure the default risk of a corporation or a security. FICO scores measure the default risk of consumers.