What Is The S&P Rating

In this lesson, the concept of credit ratings was introduced and explained. The three major credit rating companies, Moody’s, S&P, and Fitch, have the same rating scheme and use the same scale to rate the creditworthiness of a company or government. The scale ranges from prime investment at the top, indicating the lowest risk of default, to default at the bottom, indicating a high risk of bankruptcy. The scale is divided into two main categories: investment grade and non-investment grade. Investment grade is considered anything above the triple B minus (Moody’s) or the B (S&P) and non-investment grade is considered anything below that. The lesson also showed how the credit rating can impact an investor when considering buying a bond or stock and how a high credit rating indicates a low risk of default. Statistics were also provided to show the percentage of companies that have gone into default based on their credit rating.