Personal Finance
Improving Your Credit Rating
Foreclosure
Money Management
Credit

What is a credit rating?

242526

Answer

User Avatar
Wiki User
10/04/2011

Your credit rating - or score - is a grade of how well you handle credit and loans. It's an evaluation of your track record for making credit payments and paying off debt on time.

It depends on two things: 1) The length of your credit history i.e. Do you have a track record that lets people see how well you handle credit? 2) The quality of your credit history i.e. During the time that you've had a credit history, have you established a pattern of making payments on time according to the terms of your loan or credit agreements?

It's important to know that the amount of money you make is not a factor in your credit score. A person with a small income who makes credit payments on time will most likely have a better score than a person with a large income who has a history of making credit payments late or defaulting on loans.

A credit rating evaluates the credit worthiness of an issuer of specific types of debt, specifically, debt issued by a business enterprise such as a corporation or a government. It is an evaluation made by credit rating agency of the debt issuers likelihood of default

Credit ratings are determined by credit ratings agencies. The credit rating represents the credit rating agency's evaluation of qualitative and quantitative information for a company or government; including non-public information obtained by the credit rating agencies analysts. Credit ratings are not based on mathematical formulas. Instead, credit rating agencies use their judgment and experience in determining what public and private information should be considered in giving a rating to a particular company or government. The credit rating is used by individuals and entities that purchase the bonds issued by companies and governments to determine the likelihood that the government will pay its bond obligations