DEFINITION of 'Corporate Credit Rating'

The opinion of an independent agency regarding the likelihood that a corporation will fully meet its financial obligations as they come due. A company’s corporate credit rating indicates its ability to pay its creditors and gives investors an idea of how well or poorly the company’s securities are likely to perform. Corporate credit ratings are an opinion, not fact.

BREAKING DOWN 'Corporate Credit Rating'

Corporate credit ratings are not a guarantee that a company will repay its obligations, but the overall, long-term track record of these ratings is strong. Standard & Poor’s says “the average five-year default rate for investment-grade corporate issuers was 1.07%, compared with 16.03% for speculative-grade companies.”

S&P, Moody’s and Fitch are the three main providers of corporate credit ratings. Each agency has its own ratings system that doesn’t necessarily equate to another company’s ratings scale, but they are all similar. Fitch and Standard & Poor’s use AAA for the highest credit quality, AA for the next best, followed by A, then BBB for good credit. Everything below BBB is considered speculative or worse, down to a D rating, which indicates default.

Since the ratings are opinions, ratings of the same company can differ among rating agencies. Investment research firm Morningstar also provides corporate credit ratings that range from AAA for extremely low default risk to D for payment default. 

During the financial crisis of 2008, companies that had received glowing ratings from various credit rating agencies were downgraded to junk levels, calling into question the reliability of the ratings themselves.

  1. Credit Agency

    A company called as a credit agency gathers debt information ...
  2. Insurance Company Credit Rating ...

    An insurance company credit rating is the opinion of an independent ...
  3. Default Risk

    Default risk is the event in which companies or individuals will ...
  4. Trade Credit

    A trade credit is an agreement in which a customer can purchase ...
  5. Credit Exposure

    Credit exposure is the total amount of credit extended to a borrower ...
  6. Trade Line

    A trade line is a record of activity for any type of credit extended ...
Related Articles
  1. Investing

    Why You Shouldn't Trust Ratings From Rating Agencies

    When the U.S. debt was downgraded, what does that really mean?
  2. Investing

    When To Trust Bond Rating Agencies

    Despite investor distrust, rating agencies can be helpful. Just be sure you use these ratings as a starting point.
  3. Investing

    What Is the Value of a AAA Credit Rating? (XOM)

    Following the Exxon credit rating downgrade, investor's are asking is there any value in even having a AAA credit rating?
  4. Investing

    The Debt Ratings Debate

    Lack of competition and potential conflicts of interest have called the value of these ratings into question.
  5. Investing

    How Credit Rating Risk Affects Corporate Bonds

    Credit migration risk is a vital part of the credit risk assessment, specifically with regard to corporate bonds which underlie numerous rating changes.
  6. Investing

    What Do AA+ And AAA Credit Ratings Mean?

    Moody's just downgraded China's credit rating. So, what does it matter if you hold a AAA or AA+ rating?
  7. Personal Finance

    Take the Right Steps to Build Excellent Credit

    There are several things you can do to protect and improve your credit score.
  8. Investing

    Junk Bonds: Friend or Foe in 2017?

    Reports from the major credit rating agencies suggest the high-yield debt market could be priced for perfection in 2017.
  9. Personal Finance

    Analyzing a Career in Credit Analysis

    If you're a number-cruncher and responsibility doesn't scare you, this could be the job for you.
  10. Personal Finance

    How Your Credit Score Compares to the Average American's

    While only a small percentage of Americans have terrible credit scores, a whopping 30% have poor or bad credit, according to the Consumer Financial Protection Bureau.
  1. Does a good credit rating guarantee repayment?

    Learn how credit ratings help investors determine the creditworthiness of an issuer and the risk associated with making an ... Read Answer >>
  2. What are the benefits of credit ratings?

    Credit ratings are an important tool for borrowers to gain access to loans and debt. Typically, the better your credit rating, ... Read Answer >>
  3. How important is credit rating on a fixed income security?

    Learn how credit ratings for fixed-income securities impact the yield and provide guidance for the amount of risk for the ... Read Answer >>
  4. What do the letters / symbols on credit ratings mean?

    Learn about the numbers, letters and symbols used to express credit ratings and credit scores. Understand what these symbols ... Read Answer >>
  5. What credit rating should I look for in an oil and gas company?

    Determine what credit rating to look for in an oil and gas company. Credit ratings reflect evaluations by credit agencies ... Read Answer >>
Hot Definitions
  1. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  2. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  3. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  6. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
Trading Center