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Credit Rating

An evaluation of the credit risk of a prospective debtor.

Business Glossary provided by
A credit rating is an assessment of the credit risk of a borrower, predicting their ability to pay back the debt and an implicit forecast of the likelihood of the debtor defaulting. Credit ratings are determined by credit rating agencies and consider past borrowing and repayment history, current debt levels, and the economic prospects of the debtor. They range from high-grade for very safe investments to junk or speculative for high-risk borrowers. The credit rating affects the interest rate that a borrower would have to pay and can impact the borrowing costs significantly.
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