Is it rated investment grade or “junk”?
Credit rating agencies can be helpful for investors as they assess the financial health of countries, companies and financial products. The eZonomics article What is … a credit rating agency? tells how the agencies use grading systems that typically range from a triple A (or AAA) rating – representing prime financial health – through to “junk” ratings of BBB- and below. The big three credit rating agencies are Moody’s, Standard and Poor’s (S&P) and Fitch.
Who rates the credit rating agencies?
Credit rating agencies came under fire for their performances in recent investment crises. Critics question if a conflict of interest arises because some credit rating agencies are sometimes paid by the organisations they rate.
Let’s get personal for a moment
Personal credit ratings also exist in some countries for individuals. However these are usually carried out by specialist companies rather than the credit rating agencies that rank countries, organisations and financial products. Nevertheless, the actions of credit rating agencies can indirectly influence households’ investments as their ratings can shift share prices and shift the interest rate at which countries can borrow.