What is a Credit-Rating?
Definition: A Credit-Rating is an evaluation of the creditworthiness of a debtor. The Credit-Rating, also known as Bond-Rating, is issued by a credit-agency specialized on the valuation of big debtors like countries and enterprises. The three most important credit-agencies are: Standard & Poor's, Moody's and Fitch.
Explanation of Credit-Ratings
This is an overview of the meaning the different ratings have:
The different categories are highlighted in various colors.
AA-AAA = secure investments (High Grade Bonds)
BBB-A = medium - good quality
BB = speculative quality
B = highly speculative quality
D-CCC = high default risk (D = Default)
Credit-Rating Classification based on Standard & Poor's
|AAA||Extremely strong capacity to meet financial commitments|
|AA||Very strong capacity to meet financial commitments|
|A||Strong capacity to meet financial commitments, but some-what susceptible to adverse economic conditions and changes in circumstances|
|BBB||Adequate capacity to meet financial commitments, but more subject to adverse conditions|
|BB||Less vulnerable in the near-term, but faces major ongoing uncertainties to adverse business, financial and economic conditions|
|B||More vulnerable to adverse business, financial and economic conditions, but has currently the capacity to meet financial commitments|
|CCC||Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments|
|CC||Currently highly vulnerable|
|C||A bankruptcy petition has been filed or similar action taken, but payments of financial commitments are continued|
|D||Payment default on financial commitments|
The credit-ratings of the three agencies Standard & Poor's, Moody's and Fitch are different. Here is an overview of their credit ratings:
Rating Comparison S&P, Moody's and Fitch