What is a Credit Rating?
A credit rating is an evaluation of the creditworthiness of an individual, company, or government entity. It is typically assigned by a credit rating agency based on an assessment of the entity’s ability to repay debt obligations in a timely manner. Credit ratings are important because they provide investors, lenders, and other stakeholders with an indication of the risk associated with lending money or investing in the entity.
Key Features:
- Credit rating agencies analyze various factors to assess the creditworthiness of an entity, including its financial health, repayment history, cash flow, assets, liabilities, and economic and industry conditions.
- Credit ratings are typically assigned using a standardized scale that indicates the risk level associated with the entity’s debt obligations.
- Common credit rating scales include letter grades such as AAA, AA, A, BBB, BB, B, CCC, CC, C, and D, with AAA being the highest rating and D indicating default.
Table of Content
- History of Credit Ratings
- List of Major Credit Rating Agencies
- Types of Credit Ratings
- Users of Credit Ratings
- Importance of Credit Ratings
- Credit Rating Scale
- Factors that go into Credit Ratings
- Difference between Credit Rating and Credit Score
- Conclusion
- Credit Rating – FAQs