InvestorQ : What is meant by credit rating and what are some key terms on credit rating to know?
Moii Chavate made post

What is meant by credit rating and what are some key terms on credit rating to know?

Answer
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Sam Eswaran answered.
1 year ago


Here are some key terms pertaining to credit rating which you must be aware of. Let me highlight as under.

Credit rating measures a borrower’s creditworthiness and provides an international framework for comparing the credit quality of issuers and rated debt securities. Rating agencies allocate three kinds of ratings: issuer credit ratings, long-term debt, and short-term debt. Issuer credit ratings are amongst the most widely watched. They measure the creditworthiness of the borrower including its capacity and willingness to meet financial needs. The top credit rating issued by the main agencies – Standard & Poor’s, Moody’s and Fitch IBCA - is AAA or Aaa. This is reserved for a few sovereign and corporate issuers. Ratings are divided into two broad groups - investment grade and speculative (junk) grade. In India the typical raters are CRISIL, ICRA, CARE and Fitch.

Credit rating agency means a body corporate which is engaged in, or proposes to be engaged in, the business of rating of securities offered by way of public or rights issue.

Credit Risk is the risk that a counterparty will not settle an obligation for full value, either when due or at any time thereafter. Credit risk includes pre-settlement risk (replacement cost risk) and settlement risk (Principal risk).