A company’s credit rating is an assessment of the credit worthiness of the company. Essentially, credit ratings are forward-looking opinions about the risk attached to giving credit (lending money) to a company.
There are several ‘credit rating agencies’ who publish credit ratings. These include S&P, Moody’s and Fitch. Each agency will form their own opinion on the risk attached to a particular borrower.
Credit ratings do not only apply to companies. They also apply to governments, local authorities, individuals and any other party. (To keep our blog more reader friendly we have only referred to companies in the explanation above.)