S&P Credit Rating

After the credit rating downgrade of USA to AA+ from previous AAA by the credit rating agency S&P,  financial world came  under the clutch of the chaos.

Many funds, insurance companies and other financial institution are mandatorily required to invest in instruments with AAA ratings and US credit downgrade should have set them on the selling spree.

But what is interesting to know is, these institutions considers the average rating given by the top three credit rating agencies- Standard & Poor’s (S&P), Moody’s and Fitch. 

Moody’s & Fitch have not yet downgraded the USA’s credit rating and they are still continuing with AAA credit rating, so average of these ratings still make USA an AAA credit rated nation.

That's why president Obama confidently boasted that USA is still a AAA rated nation.

If Fitch and Moody’s downgrades US A’s credit rating in future, global investors and foreign governments are still left with many choices for their AAA credit rating requirement.



S&P Credit Rating



Credit Rating and its Implications

Credit rating gives the future prospects about the credit worthiness of the borrower in respect of the specific financial obligation.

Credit rating tells creditors about the risk attached with the debt financial instruments which they intend to buy. Better the rank lesser is the risk.Credit ratings are issued by credit rating agencies, major rating agencies are- Standard & Poor’s, Fitch, Moody’s are few prominent rating agencies.

Credit Rating	Opinion
AAA	Extremely  Strong capacity to meet the financial commitments(Highest rating)
AA	Very Strong capacity to meet the financial commitments
A	Strong capacity to meet financial commitments but subject to adverse economic conditions
BBB	Adequate capacity to meet financial commitments but subject to adverse economic conditions
BB	Currently OK but less vulnerable to adverse business, financial and economic condition
B	Currently OK but more vulnerable to adverse business, financial and economic condition
CCC	Currently Vulnerable and dependent on business, financial and economic conditions
CC	Currently Highly Vulnerable
C	Currently Highly Vulnerable and under other defined circumstances
D	Payment Default on financial Commitments

Note: + and - sign are used to show relative standing within the major category