how creditworthiness is assessed for businesses and governments
credit ratings agencies assess the creditworthiness of businesses governments and other entities assigning them letter grades rather than numbers they also rate the credit quality of the debt such as bonds that these entities may issue the major credit rating agencies are fitch ratings moody s investors service and s p global another large ratings agency am best focuses on the insurance industry all of these agencies are private companies and typically paid by the entities they rate while their ratings systems differ all assign letter grades from aaa best down to c or d worst based on their assessment of that particular entity s creditworthiness the higher the grade the more likely it will be to repay its debts in the ratings agency s opinion an entity that has dropped a number of letter grades could be considered to be credit impaired credit ratings take a variety of factors into account which will vary based on the type of entity that s being rated as s p global explains the credit analysis of a corporate issuer typically considers many financial and non financial factors including key performance indicators economic regulatory and geopolitical influences management and corporate governance attributes and competitive position 3in rating a government entity on the other hand the analysis may concentrate on fiscal and economic performance monetary stability and the effectiveness of the government s institutions s p global notes 3