Rating

rating

The grading of a security with respect to a characteristic or a set of characteristics such as safety and growth. Rating is most often applied to debt securities, which are graded according to the issuer's ability to pay interest and principal when due. See also bond rating, downgrading, Moody's Investment Grade, not rated, stock rating, upgrading.

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Rating. Rating means evaluating a company, security, or investment product to determine how well it meets a specific set of objective criteria.

For example, a bond issue may be rated along a spectrum from highest quality investment grade to speculative, or from AAA to D.

Rating typically affects the interest rate a fixed-income security must pay to attract investors, forcing lower-rated bond issuers to pay higher rates. Other investors may shun low-rated investments entirely, unwilling to take the risk that the issuer might default. However, ratings are not infallible, even in industries, such as insurance, that are regularly scrutinized.

Rating differs from ranking, which assigns the relative standing of two or more similar items in relation to each other.