- 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-
- Quick investment decisions
- Safeguard against bankruptcy
- Risk reorganization etc
- To issuer company-
- Lower cost of borrowing
- lower cost of issue
- better brand image
Do not downgrade companies promptly
Errors of judgment in assigning high rating to product etc.