Credit rating — what is it? (Moody's, S&P, Fitch)
Credit ratings from Moody's, S&P and Fitch agencies — definition, scale, significance for investors. How to read bond and country ratings?
Definition
Credit rating — assessment of the creditworthiness of a bond issuer (country, company, institution) assigned by independent rating agencies. It determines the probability that the issuer will repay its obligations.
Three main agencies
- S&P Global Ratings — Standard & Poor's
- Moody's Investors Service
- Fitch Ratings
Rating scale
| S&P / Fitch | Moody's | Meaning |
|---|---|---|
| AAA | Aaa | Highest quality |
| AA | Aa | Very high |
| A | A | High |
| BBB | Baa | Medium (investment grade) |
| BB | Ba | Speculative |
| B | B | Highly speculative |
| CCC | Caa | Significant risk |
| CC/C | Ca/C | Near default |
| D | — | Default |
Investment grade threshold: BBB- (S&P/Fitch) / Baa3 (Moody's). Below = "junk bonds".
Poland's rating
Poland has a rating:
- S&P: A- (stable outlook)
- Moody's: A2
- Fitch: A-
This means solid creditworthiness — Polish government bonds are considered safe.
Why is rating important?
- For investor — lower rating = higher risk, but also higher yield
- For issuer — lower rating = more expensive borrowing
- For country — rating downgrade can cause capital outflow and currency weakening
How Freenance can help
Freenance considers issuer ratings when analyzing your bond portfolio. You see credit risk distribution and can consciously manage exposure to issuers with different ratings.
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