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

Investment Grade:    S&P Moody's Fitch
   AAA Aaa AAA
   AA+  Aa1  AA+
   AA  Aa2  AA
  AA-  Aa3  AA-
  A+  A1  A+
  A  A2  A
  A-  A3  A-
  BBB+  Baa1  BBB+
  BBB  Baa2  BBB
  BBB-  Baa3  BBB-
Non-Investment-Grade: BB+ Ba1 BB+
   BB  Ba2  BB
   BB-  Ba3  BB-
   B+  B1  B+
 

 B

 B2

 B

   B-  B3  B-
   CCC+  Caa1  CCC+
   CCC  Caa2  CCC
   CCC-  Caa3  CCC-
   CC  Ca  CC+
  C   CC
      CC-
  D C DDD