Credit Rating vs. Credit Score: What’s the Difference?

Generally, ratings are for businesses and countries, scores are for individuals

Credit scores are three-digit numbers that tell lenders whether an individual is likely a responsible borrower. Credit ratings, on the other hand, are letter ratings assigned to corporations or governments and are used by investors to determine their riskiness. Learn how about the similarities and differences between credit scores and credit ratings, as well as how they are calculated and how they are used.

Key Takeaways

  • Credit ratings are expressed as letter grades and used for businesses and governments.
  • Credit scores are three-digit numbers used for individuals and some small businesses.
  • Your credit score is based on information from the three major credit reporting agencies: Experian, TransUnion, and Equifax.
  • FICO credit scores range from 300 to 850.
  • Credit ratings are produced by credit rating agencies, such as S&P Global, Moody's Investor Service, or Fitch.

Credit Rating vs. Credit Score

What is a credit rating versus a credit score? A credit rating is expressed as a letter grade and reflects the creditworthiness of a business or government. A numerical credit score, also an expression of creditworthiness, is used for individual consumers or small businesses.

Both ratings and scores are designed to show potential lenders and creditors a borrower’s likelihood of repaying a debt. They are created by independent third parties rather than by creditors or consumers. Credit scores are paid for by the entity requesting it as well as the creditor.

Your credit score is a number based on information from your credit reports at the three major credit reporting bureus: Equifax, Experian, and TransUnion. When it comes to applying for a personal loan, mortgage, or new credit card, lenders will review your personal credit score.

FICO credit scores for individuals have a range of 300 to 850.

Certain credit scores—for instance, the Dun & Bradstreet PAYDEX, Experian’s Intelliscore Plus, or the FICO Small Business Scoring Service—apply only to businesses. The PAYDEX uses a scale from zero to 100, while the Intelliscore Plus and FICO SBSS use a scale of 300-850, and zero to 300, respectively.

Credit ratings are produced by ratings agencies like S&P Global, Moody's Investor Service, or Fitch. They are letter grades that indicate the risk of default.

What Is a Credit Rating and How Is It Determined?

When creating a credit rating, all agencies can set their own scales, but the ratings most popularly used are produced by S&P Global. It uses AAA ratings for corporations or governments that have the strongest capacity for meeting financial commitments, followed by AA, A, BBB, BB, B, CCC, CC, C, and D for default. Pluses and minuses may be added to distinguish differences between ratings from AA to CCC.

To calculate these ratings, credit ratings agencies like S&P Global, Fitch Ratings and Moody’s review a business’s or government’s history of borrowing and repaying loans, including whether it has a history of missed payments, bankruptcies, or defaults. They will also review cash flows and debt levels.

The agency also looks at the borrower's cash flows and current debt levels. If the organization has steady income and the future looks bright, the credit rating will be higher. If there are any doubts about the borrower's economic outlook, their credit rating will fall.

The credit ratings agencies also assign outlook ratings—“negative,” “positive,” “stable,” and “developing”—to countries. These indicate the potential trend in a country’s rating over the next six months to two years.

What Are Consumer Credit Scores?

Credit scores are expressed as a three-digit number. The most commonly used credit score in consumer lending decisions is the FICO, or Fair Isaac Corporation, score.

FICO takes information several factors about an individual’s finances into account, including their payment history, credit mix, new credit accounts, credit utilization ratio, and length of credit history.

Another credit score for individuals is called the VantageScore, which is the same at all three credit bureaus, unlike the FICO score which can vary slightly. But most lenders use FICO scores when assessing the creditworthiness of a consumer.

FICO scores range from 300 to 850. A poor score is between 300 and 579, a fair score is from 580 to 669, a good score is from 670 to 739, a very good score is from 740 to 799, and an exceptional score is from 800 to 850.

The higher your score, the more likely you will be to qualify for loans and better the interest rates.

How Do I Improve My Credit Score?

You can take several steps to improve your credit score. First, check your credit report for errors and make sure correct any inaccuracies. Pay your bills on time, making at least the minimum payments. Aim to reduce your debt and have a healthy credit mix.

Does Checking Your Credit Report Affect Your Credit Score?

Checking your credit score and credit report will not have an impact on your credit score. This is considered a "soft inquiry." You are entitled to one free copy of your credit report from the major credit bureaus once per year, which you can get through

Does Opening New Credit Affect Your Credit Score?

When you open new credit, the lender will pull your credit history, which creates a "hard inquiry" that can negatively affect your credit score temporarily. However, if you use that credit responsibly, you can boost your credit score in the long-term.

The Bottom Line

Although scales may vary, the most commonly used scales for credit scores consider borrowers ranked in the bottom third of the scale to be risky. Borrowers with FICO scores from 300 to 579, for example, are considered risky, while those with scores ranging from 580 to 850 are considered fair to excellent.

On the S&P credit rating scale, borrowers with ratings under BBB, in the bottom two-thirds of the scale, are considered “non-investment grade,” while those that fall between BBB and AAA on the scale are considered “investment grade.”

Article Sources
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  1. U.S. Federal Trade Commission. "Understanding Your Credit: What’s in Your Credit Report? and How to Get Your Credit Report."

  2. S&P Global. "S&P Global Ratings Definitions."

  3. Fitch Ratings. "Rating Definitions."

  4. Moody’s. "Moody’s Investors Service."

  5. S&P Global. "S&P Global Ratings Definitions: B. Rating Outlooks."

  6. MyFICO. "What's In My FICO Scores?"

  7. Experian. "VantageScore®: The First Tri-Bureau Credit Score."

  8. "What Is a Credit Score?"

  9. MyFICO. "What Is a Credit Score?"

  10. Experian. "What Is a Good Credit Score?"

  11. MyFICO. "How to Improve Your FICO Score."

  12. The Association of Corporate Treasurers. "Corporate credit ratings: a quick guide."

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