What is the difference between a credit enhancement and a credit support?

What is the difference between a credit enhancement and a credit support Introduction: The Importance of Credit Risk Management Hello everyone, and welcome to today's video. In the world of finance, managing credit risk is a top priority for individuals and institutions alike. It involves assessing the likelihood of a borrower defaulting on their financial obligations. To mitigate this risk, various strategies and tools are employed. Two such tools, credit enhancement and credit support, play a pivotal role. While they may seem similar at first glance, they have distinct features and applications. Let's delve deeper into these concepts. Credit Enhancement: Strengthening the Credit Profile Credit enhancement refers to measures taken to improve the creditworthiness of a borrower or a financial instrument. It aims to reduce the perceived risk associated with lending or investing. One common form of credit enhancement is collateral. By pledging an asset of value, the borrower provides an additional layer of security. This collateral can be liquidated in case of default, reducing the lender's potential loss. Another method of credit enhancement is through guarantees.