Credit rating definition

A credit rating is an assessment of the risk (likelihood debt will be repaid on time) associated with providing credit to an individual, corporation or other public or private entity. Credit ratings may be calculated by individual businesses based on their experience with the subject and, more often, by credit bureaus. These credit bureaus use data gathered from a wide variety of sources to determine how much credit is already in place, the payment history and other factors to calculate a numerical score -- a credit rating.

Credit ratings are used to determine whether or not to extend credit and if so, how much and at what terms. Poorer ratings equate to higher credit risk and thus greater difficulty in obtaining credit and higher interest rates when it is granted.

A corporate credit rating may be used to determine whether or not to invest in that company or if or how to do business with them.

Your personal and business credit ratings are valuable assets and should be managed carefully.