An assessment of the creditworthiness of a borrower or debt instrument, typically expressed as letter grades (AAA, AA, A, BBB, etc.). Credit ratings help investors evaluate the risk of default and determine appropriate interest rates.
Compound from 'credit' (from Latin credere, meaning to believe or trust) and 'rating' (from rate, meaning to estimate value). Modern credit rating agencies emerged in the early 1900s with John Moody's railroad bond ratings in 1909.
The big three credit rating agencies (Moody's, S&P, Fitch) wield enormous power - a single downgrade can cost a company millions in higher borrowing costs, yet these agencies are paid by the very companies they rate, creating obvious conflicts of interest!
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