Glossary of Municipal Securities Terms

CREDIT ENHANCEMENT

The use of the credit of an entity other than the issuer or obligor to provide additional security in a bond or note financing. This term typically is used in the context of bond insurance, bank letters of credit and other facilities, state intercept guarantees and credit programs of federal or state governments or federal agencies, but also may refer more broadly to the use of any form of guaranty, secondary source of payment or similar additional credit-improving instruments. See: BOND INSURANCE; CREDIT FACILITY; LETTER OF CREDIT; SECONDARY INSURANCE; SURETY BOND.

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