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Here is my cheat-sheet for the long-term corporate credit ratings that the three major US rating agencies Moody’s, Standard & Poor’s, and Fitch use and how they fit into major categories.
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- What Does A Credit Rating Tell You?
- How Do Credit Ratings Work?
- Who Assigns Credit Ratings?
- What Countries Have The Best Ratings?
A credit rating tells you the creditworthiness of a borrower, which is their ability to repay debt in time. These ratings estimate the risk of lending money to a company, but they don’t tell you about its profitability. Credit ratings also exist for individuals and governments. Credit ratings have a significant impact on the company’s ability to ac...
Credit ratings are expressed as a letter grade which ranges from AAA (best rating possible) to D (weakest rating, junk status). Each grade is called a notch. For example, if a company goes from AA to AA+, investors say it increased a notch. Notches equal to or above BBB- (Baa3 for Moody’s) are considered investment grade. These are attributed to co...
A credit ratings agency. They analyze the creditworthiness of companies based on factors such as borrowing history, repayment behavior, and financial stability. Investors and lenders look for companies with higher credit scores, as this indicates a lower credit (more ability to honor financial commitments). The big three (most significant) credit r...
European countries dominate the small list of countries with the best credit rating (AAA), although a lot of them don’t have the Euro as their official currency. More specifically, Norway, Switzerland, Liechtenstein, and Sweden are some of the few AAA-rated countries. They are located in Europe, but didn’t adopt the Euro. Interesting, right? Furthe...
1 day ago · Moody’s ratings use a combination of letters and numbers, such as Aaa, Aa, and A, with numerical modifiers (1, 2, 3) to indicate relative standing within each category. S&P and Fitch, on the other hand, use a simpler letter-based scale like AAA, AA, and A, with modifiers like pluses (+) and minuses (-) to provide additional granularity.
Moody's Investors Service provides investors with a comprehensive view of global debt markets through credit ratings and research. Learn how Moody's ratings and analysis speak to the relative credit risk of debt instruments and securities across industries and asset classes around the globe.
Credit ratings may facilitate the process of issuing and purchasing bonds and other debt issues by providing an efficient, widely recognized, and long-standing measure of relative credit risk. Credit ratings are assigned to issuers and debt securities as well as bank loans.
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Although the agencies adopt different rating scales, there is equivalence across the scales which facilitates comparison such that a Baa1 rating (for example) from Moody’s is equivalent to a BBB+ rating from S&P and BBB+ from Fitch. The full rating scales are shown in Figure 1.
Moody’s credit ratings represent a rank-ordering of creditworthi-ness, or expected loss. Expected loss is a function of the probability of default and the expected severity of loss given a default. Ratings are forward looking in that the rank ordering is designed to hold across multiple horizons.
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