What is Credit Rating Agencies?
Credit rating agencies rate the ability of a borrower to pay back the principal or the interest amount.
A high rating means that the borrower has lesser chances to default on repayment and vice versa. Investors look at these ratings to understand the risk and return that they are willing to take. As the credit rating goes down the expected returns from such products is higher.
Moody’s Investor Services and Standard & Poor’s dominate the markets in rating services. The ratings are reviewed periodically and publicly available. These rating agencies work independently without bias to access the products.
” Today credit rating agencies rate companies, countries and bonds. ” – Mike Fitzpatrick