Credit Rating

Credit Rating

Credit rating is an assessment of the creditworthiness of an entity, such as a company, a government, or a securitisation. Credit ratings are assigned by credit rating agencies, which are companies that specialize in assessing credit risk.

In the context of securitisation, credit ratings are used to assess the risk of the underlying assets. The higher the credit rating of the underlying assets, the lower the risk of the securitisation.

There are a number of different credit rating agencies that operate in the world, including:

• Moody's
• Standard & Poor's
• Fitch Ratings

The ratings assigned by credit rating agencies are typically based on a number of factors, including:

• The creditworthiness of the borrowers: The creditworthiness of the borrowers is the most important factor in determining the credit rating of a securitisation.
• The structure of the securitisation: The structure of the securitisation also plays a role in determining the credit rating. For example, a securitisation with a senior/subordinated structure is typically rated higher than a securitisation without a senior/subordinated structure.
• The underlying assets: The underlying assets are also important in determining the credit rating. For example, a securitisation of mortgages is typically rated higher than a securitisation of credit cards.