Credit Enhancement

Definition - What does Credit Enhancement mean?

Credit enhancement is when a person needs to augment their own credit rating, or a business's credit rating, and does so by gaining guarantees from a third party that if the borrower defaults on any payment, the cosigner will pay for it. In this sense, the creditworthiness of the borrower is enhanced. Other ways of enhancing credit is through the application of collaterol or through the provsion of insurance.

Justipedia explains Credit Enhancement

If a person or business credit score is not up to the level that the regulations would require, they would have the possibility of alternative financing options, which act to ensure that payments are made if the main income is lost due to the fact that the creditworthiness of the borrower has not been established yet.

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