Credit ratings provide retail investors and information organizers with assistance in determining whether bond issuers and other debt instruments and fixed income securities can meet their obligations or not. And this post, we will introduce to readers about credit rating companies.
In the previous post, we introduce people to credit bureau check, to get more information about it, you can read Five ways for you living in the US to credit bureau check for free. Now, let find knowledge about credit rating companies in the post today.
CREDIT RATING COMPANIES
When issuing a “rating” letter, credit rating agencies (CRAs) provide objective analysis and independent evaluation of the companies and countries that issue the securities. Here is a basic history of how ratings and agencies are developed in the United States and developed to assist investors across the globe.
1. An overview of credit ratings and credit rating companies
Countries are given sovereign credit rating. This assessment analyzes the general creditworthiness of a country or foreign government. Credit rating takes into account the general economic conditions of a country, including the volume of foreign investment, public and private, capital markets transparency and foreign exchange reserves.
Sovereign ratings also assess political conditions such as overall political stability and the level of economic stability that a country will sustain during a political transition. Institutional investors rely on sovereign ratings to qualify and quantify the investment climate of a particular country.
Sovereign ratings are often the prerequisite information institutional investors use to determine whether they will consider more specific companies, industries, and classes of securities issued in a particular country.
Credit ratings, debt ratings or bond ratings are issued to individual companies and to individual securities such as preferred stock, corporate bonds, and various government bonds. Ratings may be assigned separately for short and long-term obligations.
Long-term rating analyzes and evaluates the company’s ability to meet its liability for all securities issued. Short-term ratings focus on the performance of specific securities under current financial conditions of the company and general operating conditions of the industry.
A credit rating agency (CRA, also known as rating service) is a company that assesses the debtor’s ability to repay a loan by paying interest on time and the possibility of default. An agency can assess the creditworthiness of debt issuers, debt instruments and in some cases, the services of the underlying debt, but not the individual consumer.
2. The big three credit rating companies
Global credit ratings are highly concentrated, with three institutions – Moody’s, Standard & Poor’s and Fitch – controlling almost the entire market.
2.1. Fitch Ratings – is one of the big credit rating companies
2.2. Moody’s Investors Service – is one of the big credit rating companies
John Moody and Company first published the “Psycho Handbook” in 1900. The guide has published basic statistics and general information on stocks and bonds of various industries. From 1903 until the stock market crash in 1907, the “Moody’s Manual” was a national publication.
In 1909, Moody began publishing “Moody’s Analyses of Railroad Investments,” which added analyst information about the value of the stock. This broadening of the idea led to the establishment of the 1914 Moody’s Investors Service, which in the next 10 years would provide ratings for almost all government bond markets at the time.
In the early 1970s, Moody’s began to rank commercial paper and bank deposits, becoming the current rating agency.
2.3. Standard & Poor’s – is one of the big credit rating companies
Henry Varnum Poor’s first published “History of Railways and Canals in the United States” in 1860, a precursor of analysis and stock reporting to be developed in the next century. Standard statistics formed in 1906, published corporate bonds, sovereign debt, and municipal bond rating.
Standard Statistics merged with Poor’s Publishing in 1941 to form Standard and Poor’s Corporation, acquired by The McGraw-Hill Enterprises, Inc. in 1966. Standard and Poor’s have become well-known for such indicators as the S & P 500, a stock market index that is both analytical and investor-driven.
Indeed, in order to get a personal loan with the best interest rate, you need to have a good credit score. To know you have a bad or good credit history, you should check your credit frequently from the credit reporting agencies.
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