Credit risk poses substantial exposure both to the banks and the economy; a scenario evident in East Africa financial crises; this is in part owing to the fact that the banking sector is vital in any economy. The decline of profitability within the banking industry and financial losses can be attributed to credit exposures that went awry. This underscores the significance of the management of credit risk within the banking sector. While lending is profitable for the banks especially because of the interest paid on the amount borrowed, it also has disadvantages resulting from delays or default in loan repayments. This study was purposed to evaluate the credit risk on the lending performance of commercial banks in Kenya. A descriptive survey research design was employed while the target population for this study was employees of the 42 commercial banks in Kenya as at 1st January 2018. Purposive sampling was used to pick 42 credit managers and simple random sampling was invoked to determine the other 301 respondents from the target population of 1260 employees. Both structured and unstructured questions were used to collect primary data. Thereafter, data was analyzed using descriptive statistics including frequency distribution tables, measures of central tendency, and standard deviations. In addition, advanced statistical techniques including logistic regression analysis and Pearson correlation were used to establish relationships among variables and provide a description of the data. The results were then presented in tabular representations supplemented by relevant explanations. The results of the study revealed that the combined effect of credit risks positively influenced the lending performance of banks. The study concluded that credit risk activities significantly influenced the lending performance of commercial banks, and as a result, the operating capital of commercial banks had gone down to very low levels since lending is a source of income for the commercial banks and this has affected the performance of the entire banking sector. The study recommended that the Government of Kenya through the National Treasury and in collaboration with the Central Bank of Kenya and the Kenya Bankers’ Association should formulate policies that will help the commercial banks reduce the level of credit risks and improve the lending performance which was currently affected to a great extent.

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