Credit rating
A credit rating assesses the credit worthiness of an individual, corporation, or even a country. Credit ratings are calculated from financial history and current assets and liabilities and tell a lender or investor the ability of the subject to pay back a loan.
A poor credit rating indicates a high risk of defaulting on a loan, and thus leads to high interest rates.
Personal credit ratings
In countries such as the United States, individuals are assigned a credit score by companies called credit bureaus. In the United States, this is a 3-digit number known as the FICO credit score. One's credit score, along with the credit report, affects one's ability to borrow money through financial institutions such as banks and credit cards. In Canada, the most common ratings are the North American Standard Account Ratings, also known as the "R" ratings, which have a range between R0 and R9. R0 refers to a new account; R1 refers to on-time payments; R9 refers to bad-debt.[1]
Corporate credit ratings
The credit rating of a corporation is a financial indicator to potential investors of debt securities such as bonds. These are assigned by credit rating agencies such as Standard & Poor's or Fitch and have letter designations such as AAA, B, CC.
Sovereign credit ratings
A sovereign credit rating is the credit rating of a sovereign entity, i.e. a country. The sovereign credit rating indicates the risk level of the investing environment of a country and is used by investors looking to invest abroad.
Hong Kong, Special Administrative Region of the People's Republic of China credit status has been raised from a 'AA-' to an 'AA' rating on 07.27.2006, 02:38 AM by Standard & Poor's Ratings Services. 'The new rating mirrors the positive effect on Hong Kong arising from the improved credit fundamentals' of China, S&P said. [1]
Credit rating agencies
Credit scores for individuals are assigned by credit bureaus (US; UK: credit reference agencies). Credit ratings for corporations and sovereign debt are assigned by credit rating agencies.
In the United States, the main credit bureaus are Experian, Equifax, and TransUnion.
In the United Kingdom, the main credit reference agencies for individuals are Experian, Equifax, and CallCredit.
In the Canada, the main credit bureaus for individuals are Equifax, TransUnion and Northern Credit Bureaus[2] (source: CIBC [3] p.14).
The largest credit rating agencies (which tend to operate worldwide) are Moody's, Standard and Poor's and Fitch.