Credit rating

#commerce/y10/Investment

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• A credit rating is an independent assessment of the ability of a corporation or a government to repay a Debt, either in general terms or regarding a specific financial obligation.
• Credit scores are assigned to individuals based on their personal history of acquiring and repaying Debt. They are checked by lenders considering loaning money to a consumer.
• Credit ratings are letter grades ranging from AAA at the top to C or D at the bottom.

Borrowing §

• When asking for a loan, you have to convince the lender that you can repay it on a regular basis. Hence, it is important to have good credit rating; which is the history of repayment.

Credit rating is affected by:

• Character: personal ability to pay their bills with NO previous credit default.
• Capacity: this refers to the person’s current Income and the level of existing Debt.
• Collateral: assets used as security for the loan. If the borrower cannot repay, the assets will be forfeited.