Question:

What is the credit rating meaning of AAA or AA credit rating; BBB and BB, BA, CA, CAA, etc – and how is credit rating explained?

Answer:

How do you know whether to invest in securities of a country or corporation? This is what the credit rating meaning is of AAA or AA, BBB and BB, Ba, Ca, Caa, or CCC, etc credit rating notations. The credit rating is explained basically by intuition - the A credit denotes lowest risk, the C and D are the highest risk and totally unacceptable for investors.

Who does the credit rating for corporations and how is credit rating explained?

Similar to consumer credit rating agencies such as Experian and Equifax, there are agencies evaluating the corporate world. Moody's, Standard & Poor's (S&P's) and Fitch IBCA are the top corporate credit rating agencies worldwide. They use slightly different credit notations, but it is clear that AA is better than Baa. To explain credit rating, refer to the table below:

Credit Rating by Moody's Credit Rating by Standard & Poor's Risk
Aaa AAA Great investment, lowest risk.
Aa AA
A A
Baa BBB Medium risk, acceptable investment.
Ba BB High risk, junk.
B B
Caa CCC Highest risk, junk.
Ca CC
C, D C, D In default.

The credit rating meaning assigned by raters to governments and corporations can be short or long term and reflect the ability of the entity to repay its debt obligations. Governments who tend to pay obligations in their own currency score lower in credit rating than those paying foreign-currency obligations.

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