Credit Rating Process

The credit rating process assesses a borrower’s ability to repay debt by analyzing financial health, stability, and past borrowing behavior. Credit rating agencies review financial statements, income, expenses, and economic factors to evaluate risk. They assign a rating—such as AAA or BB—which indicates the borrower’s creditworthiness and likelihood of default. These ratings help lenders decide whether to lend money and at what interest rate, and they also influence investors’ decisions. The process ensures transparency and provides a standardized way to compare credit risk across different borrowers or securities.