Credit Ratings: Evaluating Creditworthiness
A credit rating is a quantified assessment of an entity's creditworthiness, used to determine if they can borrow money. Credit ratings are calculated by credit rating agencies, who are paid by the entities seeking credit ratings.Formula
Payment History (35%) + Amount Owed (30%) + Length of Credit History (15%) + New Credit (10%) + Credit Mix (10%) = Credit RatingHow do I calculate the credit rating?
In order to calculate your credit rating, it is important to understand the five main factors that make up your FICO credit score. These are Payment History (35%), Amount Owed (30%), Length of Credit History (15%), New Credit (10%), and Credit Mix (10%). To calculate your credit rating, use the following formula: Payment History (35%) + Amount Owed (30%) + Length of Credit History (15%) + New Credit (10%) + Credit Mix (10%) = Credit Rating. You can calculate your credit rating using a spreadsheet program such as Sourcetable.
What is a credit rating?
A credit rating is a quantified assessment of a borrower's creditworthiness in general terms or with respect to a particular debt or financial obligation.
Who can receive a credit rating?
Any entity can receive a credit rating.
Who calculates credit ratings?
Credit rating agencies calculate credit ratings.
Who pays the credit rating agency?
Entities seeking credit ratings pay the credit rating agency.
What type of entities receive credit ratings?
Credit rating agencies calculate a company or government credit rating.
What do credit rating agencies use to calculate credit ratings?
Credit rating agencies assign letter grades to credit ratings and use a numerical scale and a letter scale to calculate credit ratings.
What are some credit rating agencies?
S&P Global, Moody's, and Fitch Ratings are credit rating agencies.
Key Points
How do I calculate credit rating?
Payment History (35%) + Amount Owed (30%) + Length of Credit History (15%) + New Credit (10%) + Credit Mix (10%) = Credit Rating
Credit Rating
A credit rating is a quantified assessment of a borrower's creditworthiness, assigned by credit bureaus to any entity that wants to borrow money.
Credit Score
Credit scores are calculated by credit bureaus using a form of Fair Isaac Corporation (FICO) credit scoring, and are used to evaluate the creditworthiness of a single entity.
Applicability
Credit ratings apply to businesses, governments, and individuals. Sovereign credit ratings apply to national governments, while corporate credit ratings apply to corporations only.
