Ratings

What are Credit Ratings?

The ability of an issuer to meet its commitment to pay all promised interest and principal amounts in full and on time is of critical importance to investors. Ratings help investors compare the relative risks of investing in a bond.

Most corporate interest rate securities are evaluated for credit quality by agencies such as Fitch, Moody's Investors Services & Standard & Poor's (their rating systems are listed in the table below). It is normally considered prudent to check the rating of interest rate securities before buying them. Such details can normally be obtained through a broker or financial adviser.

For more information on each ratings agencies, please click on their names below.

Fitch  Moody's Standard & Poor's What the Rating Means

Investment Grade
AAA Aaa AAA Highest credit quality
AA Aa AA Very high credit quality
A A A High credit quality
BBB Baa BBB Good credit quality

Non-investment Grade
BB Ba BB Speculative
B B B Highly Speculative
CCC Caa CCC High Default Risk
CC Ca C High Default Risk
C C C High Default Risk
DDD C D Default
DD C D Default
D C D Default

Generally, as a bond's rating decreases, investors should look for a higher return to compensate for increased investment risk. Investors should also remember that ratings can change over the life of an interest rate security. Any change in the rating of a company would normally have a direct impact on the market price of its securities. 

If a company is unrated, it does not necessarily mean that its bonds are high risk, but it does mean that investors will have to turn to other means to evaluate its financial strength. 


An investment adviser or broker may be able to help by sharing some of his or her company research data.