Credit Rating

Description of Credit Rating. Explanation.

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Definition Credit Rating. Description.

Credit Rating is an evaluation of a corporation's creditworthiness based upon present its current financial condition and past credit history. Credit ratings are used as a benchmark to assess the future ability of a creditor to pay back loans (credit risk). It is the result of a credit scoring statistical system used to determine whether or not to grant credit by assigning numerical scores to various characteristics related to creditworthiness. The score given by a credit rating agency is important because it affects the perceived risk element incorporated into interest rates that are applied to loans.

Credit bureaus and credit reporting agencies provide credit information to creditors, such as banks and businesses, to help them decide whether to issue a loan or extend credit. Well-known rating agencies include Dunn & Bradstreet, Standard & Poor’s, Fitch, and Moody’s.

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End of description Credit Rating. An explanation.