Features include interactive map, in-depth stories, and more.Download now. »
The week's top five must-sees,
delivered to your inbox.
A credit rating agency is a company that assigns credit ratings — rating of the debtor's ability to pay back the debt by making timely interest payments and of the likelihood of default. An agency may rate the creditworthiness of issuers of debt obligations, the debt instruments, and/or in some cases, the servicers of the underlying debt, but not individual consumers. Debt instruments the agencies rate may include government bonds, corporate bonds, CDs, municipal bonds, preferred stock, and collateralized securities, such as mortgage-backed securities and collateralized debt obligations. The issuers of the obligations/securities may be companies, special purpose entities, state and local governments, non-profit organizations, or sovereign nations. A credit rating permits—or makes much more easy—the trading of securities on a secondary market. A credit rating affects the interest rate a security pays out, with higher ratings leading to lower interest rates. Individual consumers are not rated for credit-worthiness by credit rating agencies, but by credit bureaus, or consumer credit reporting agencies, which issue credit scores. The value of such security ratings has been widely questioned. Hundreds of billions of securities given the agencies highest rating were downgraded to junk during the 2007–09 financial crisis. Ratings downgrades during the European sovereign debt crisis of 2010–12 have been blamed by EU officials for accelerating the crisis. (via Freebase)