credit rating
An assessment of the creditworthiness of a borrower — individual, company, or government — typically assigned by agencies like Moody's, S&P, or Fitch.
Example
“A company with a AAA credit rating can borrow money at lower interest rates than one rated BB.”
Memory Tip
Your credit RATING is like a school grade — AAA is an A+, BB is a B−.
Why It Matters
Your credit rating directly affects whether lenders will approve you for loans, mortgages, or credit cards, and what interest rates you will pay. A higher credit rating can save you thousands of dollars in interest over the life of a loan, while a lower rating may result in loan denial or significantly higher costs.
Common Misconception
Many people believe that checking their own credit score will damage their rating, when in fact checking your own score is a soft inquiry that does not affect it at all. Only hard inquiries from lenders reviewing your application for new credit have the potential to temporarily lower your score.
In Practice
A person with an excellent credit rating of 750 and above might qualify for a mortgage at 6 percent interest, while someone with a poor rating of 580 would face 10 percent interest on the same loan. Over a 30-year mortgage of 300,000 dollars, this difference means the person with the poor rating would pay hundreds of thousands of dollars more in total interest.
Etymology
From Latin 'creditus' (trusted) + Old French 'rater' (to estimate value).
Common Misspellings
Check your credit score free — no impact
Related Terms
More in credit
Other credit terms you should know
See Also
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