What is an 'Asset Quality Rating'

An asset quality rating is a review or evaluation assessing the credit risk associated with a particular asset. These assets usually require interest payments - such as a loans and investment portfolios. How effective management is in controlling and monitoring credit risk can also have an affect on the what kind of credit rating is given.

BREAKING DOWN 'Asset Quality Rating'

Many factors are considered when rating asset quality. For example, consideration must be put into whether or not a portfolio is appropriately diversified, what regulations or rules have been put in to place to limit credit risks and how efficiently operations are being utilized. Typically, a rating of one shows that asset quality is good and there is very little credit risk, while a rating of five can signify that there are major asset quality problems and issues that need to be managed.

RELATED TERMS
  1. Credit Rating

    An assessment of the creditworthiness of a borrower in general ...
  2. Credit Analyst

    A financial professional who has expertise in evaluating the ...
  3. Trade Credit

    An agreement where a customer can purchase goods on account (without ...
  4. Credit Limit

    The amount of credit that a financial institution extends to ...
  5. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
  6. Good Credit

    A qualification of an individual's credit history that indicates ...
Related Articles
  1. Small Business

    Small Business Loan Vs Line of Credit: How They Differ

    Understand the differences between a small business loan and a line of credit, and learn some of the most appropriate uses for each form of financing.
  2. Personal Finance

    The Basics Of Lines Of Credit

    Lines of credit are potentially useful hybrids of credit cards and normal loans. Learn how a line of credit can help (and hurt) your finances, and how to find the best one to suit your needs. ...
  3. Investing

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  4. Personal Finance

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  5. Personal Finance

    Credit Risk Analyst: Career Path & Qualifications

    Learn more about what kind of work credit risk analysts do on a day-to-day basis, and determine whether this career is one you'd like to pursue.
  6. Investing

    Bank Credit Quality Trends

    The four largest U.S. based banks have all reported fourth quarter of 2009 earnings.
  7. Investing

    Millennials: Prevent a Bad Credit Score

    Here are five ways to help prevent getting a bad credit score that could affect future loan, credit card or mortgage approvals.
  8. Personal Finance

    How To Establish A Credit History

    Can't get a credit card without a credit history, and can't get a history without a card? Break the Catch-22.
  9. Personal Finance

    How To Overcome Bad Credit

    Some lenders can look overlook your credit score and assess other factors that fairly determine if you are a reasonable credit risk.
  10. Small Business

    What's Involved in Quality Management?

    Essentially, quality management entails overseeing all activities and tasks needed to maintain excellence.
RELATED FAQS
  1. What are the benefits of credit ratings?

    Credit ratings are an important tool for borrowers to gain access to loans and debt. Good credit ratings allow borrowers ... Read Answer >>
  2. What is the difference between a loan and a line of credit?

    Learn to differentiate between lines of credit and standard loans, and determine when you are likely to use each method of ... Read Answer >>
  3. What is the difference between bad credit and no credit?

    The answer to this question will depend on what information (if any) is found on your credit report, such as any bankruptcy ... Read Answer >>
  4. Is it possible to have a credit limit that's too high?

    Avoid these pitfalls when working with high credit limits, and learn how to increase your credit score by increasing your ... Read Answer >>
Hot Definitions
  1. Quadruple Witching

    The expiration date of various stock index futures, stock index options, stock options and single stock futures. All stock ...
  2. Co-pay

    A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
  3. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  4. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  5. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  6. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
Trading Center