What is a credit rating?
A credit rating is an agency opinion about an issuer’s or debt instrument’s creditworthiness. It is not a guarantee or investment recommendation.
Scope and scales
1. Issuer versus issue An issuer rating can differ from the rating on a specific secured or subordinated bond. 2. Scales Agencies have their own symbols and cutoffs. Read the rating definitions and context. 3. Updates Ratings and outlooks can change when finances or economic conditions shift. 4. Yield relationship Perceived credit risk can affect demanded yield alongside maturity and market rates.
Interpretation
5. Limits Ratings may miss risks. Investors should also read financial statements and bond terms. 6. Personal scores A consumer lending score differs from a bond or sovereign credit rating. 7. A downgrade A cut can affect funding costs and eligible investor demand, but markets may anticipate it. Ratings cannot time default or prices precisely.