What is the meaning of Credit Rating?

Credit Rating-

• Credit rating is an expression through the use of alpha- numeric symbols of the opinion about credit quality of the issuer of securities with reference to a particular instrument.
• Credit rating is a simple and costly to understand.
• Such rating, which is expressed in symbols, is subject to an upward or downward change as the situation changes.
• Benefits of credit rating-

• To investors-

1. Quick investment decisions
2. Safeguard against bankruptcy
3. Risk reorganization etc

• To issuer company-

1. Lower cost of borrowing
2. lower cost of issue
3. better brand image
4. growth

• Criticism-

Do not downgrade companies promptly

Errors of judgment in assigning high rating to product etc.