A credit rating is an assessment of the creditworthiness of a borrower, whether a corporation, government, or other entity, provided by credit rating agencies. It evaluates the likelihood that the borrower will default on its debt obligations and directly impacts borrowing costs and bond prices. Ratings typically range from AAA (highest quality, lowest risk) to D (default), with anything below BBB- (S&P) or Baa3 (Moody's) considered non-investment grade or junk.
Example
“When Moody's downgraded a corporation's credit rating from investment grade (Baa3) to junk status (Ba1), the company's bond prices fell sharply and its borrowing costs increased significantly.”