A credit rating is like a grade for how likely an individual, company, or even a country is to pay back debts on time. Credit rating agencies or bureaus keep track of relevant information about a person, company, or country to determine their credit ratings.

A credit rating for an individual is called a credit score and is a three-digit number, like a batting average in baseball. Credit bureaus (like Equifax or TransUnion) look at how consistently you pay your bills and then publish your credit score, which creditors like banks use to determine how much they are willing to loan you.

Commercial credit rating agencies like Moody’s or Standard & Poor’s assign ratings to companies – from AAA down to D – that reflect how likely it is that the company will pay back dividends on your investment. Some rating agencies also give sovereign credit ratings, i.e. ratings for countries. These ratings give you some idea of how safe it is to invest in that country and take factors like political stability into account.

Your credit score tells creditors (like banks) if you are a good investment or not. Corporate and sovereign credit ratings can help you decide what might or might not be a wise investment.

Tags: credit bureau, credit history, credit rating, credit score