Credit Ratings 101

Credit ratings are quite simply an analytical opinion on a company, entity, or government’s capacity to satisfy its financial obligations. Morningstar DBRS’s credit ratings communicate our opinion of that to global capital markets.

Morningstar DBRS uses a letter grade system for its credit ratings. Morningstar DBRS issues credit ratings from AAA (a rating indicates low credit risk) to a C (a rating that indicates increased credit risk). Within these rating symbols, we can further show levels of credit risk by using delineations such as (high) and (low) within each category except at the top-of-the-chart AAA level. So, a credit rating might be AA (low) or BBB (high).

Credit ratings are comparable across asset classes. For example, a AA credit rating on sovereign government debt and a AA-rated structured finance transaction backed by a pool of U.S. auto loans both indicate a comparable forward-looking opinion when these credit ratings are issued by the same credit rating agency. This allows people to better compare what would otherwise seem like two different types of debt.