credit rating

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Related to credit ratings: Credit scores, Credit Ratings Agencies

Credit rating

An evaluation of an individual's or company's ability to repay obligations or its likelihood of not defaulting See: Creditworthiness.

Credit Rating

1. See: Bond rating.

2. See: FICO score.

credit rating

A grading of a borrower's ability to meet financial obligations in a timely manner. Credit ratings are set by lenders and by independent agents for companies, individuals, and specific debt issues. See also bond rating.

Credit rating.

Your credit rating is an independent statistical evaluation of your ability to repay debt based on your borrowing and repayment history.

If you always pay your bills on time, you are more likely to have good credit and therefore may receive favorable terms on a loan or credit card, such as relatively low finance charges.

If your credit rating is poor because you have paid bills late or have defaulted on a loan, you may be offered less favorable terms or may be denied credit altogether.

A corporation's credit rating is an assessment of whether it will be able to meet its obligations to bond holders and other investors. Credit rating systems for corporations generally range from AAA or Aaa at the high end to D (for default) at the low end.

credit rating

an assessment of the creditworthiness of a firm or an individual, which indicates the amount of CREDIT they can reasonably be allowed by a supplier.

The creditworthiness of a company can often be assessed on the basis of information derived from the company's past annual report and accounts, and from confidential details provided by the company's bank. Additionally, there are a number of specialized credit rating companies, such as Dunn and Bradstreet in the UK, who provide information about the creditworthiness of companies in return for a fee.

The creditworthiness of individual customers is more difficult to assess and is often based on some hard information such as court bankruptcy proceedings and default information on hire purchase agreements, together with circumstantial information such as the postal areas in which a potential debtor lives (indicating a suburb or inner city estate, for example). Firms specialize in collecting and processing such data and provide credit ratings in return for a fee. Under the terms of the UK CONSUMER CREDIT ACT, an individual has a right to inspect any credit record kept about them by such a firm.

Suppliers use credit ratings as a means of determining the maximum amount of credit to allow a customer as part of their CREDIT CONTROL procedures.

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