Credit Rating Agencies

Credit Rating Agencies (CRAs), evaluate the creditworthiness of organizations that issue debt in public markets. They typically assign a letter grade to each issuer or to a instrument, which represents an opinion as to the likelihood that the organization will be able to repay both the principal and interest as they become due. This covers the debts of corporations, nonprofit organizations, and governments, as well as “securitized assets” – which are assets that are bundled together and sold as a security to investors.

Many factors go into the assignment of ratings, including the profitability of the organization, its financial flexibility and its total indebtedness.

A credit rating facilitates the trading of securities on a secondary market. It affects the interest rate that a security pays out, with higher ratings leading to lower interest rates.

Alacra tracks the issuers rated by A.M. Best, Fitch Ratings, Moody’s and Standard & Poor’s.