{"id":155834,"date":"2022-06-22T06:27:03","date_gmt":"2022-06-22T00:57:03","guid":{"rendered":"https:\/\/cbselibrary.com\/?p=155834"},"modified":"2022-06-23T09:14:38","modified_gmt":"2022-06-23T03:44:38","slug":"advantages-and-disadvantages-of-credit-rating","status":"publish","type":"post","link":"https:\/\/cbselibrary.com\/advantages-and-disadvantages-of-credit-rating\/","title":{"rendered":"Advantages And Disadvantages Of Credit Rating | Types, What is Credit Rating?, 8 Key Pros and Cons of Credit Rating"},"content":{"rendered":"
Advantages And Disadvantages Of Credit Rating:<\/strong> According to The Economic Times, \u201cCredit rating is an analysis of the credit risk associated with a financial instrument or a financial entity.\u201d It is completely based on the credential as well as the financial status of the entity done in terms of lending and borrowing. In America, TransUnion, Experian and Equifax are the three major credit reporting agencies. Credit rating can not be a static number rather it remains dynamic based on new information which is provided by financial institutions. If anyone misses a payment and then tries to apply for new credit at that point, the information gets forwarded to credit reporting agencies. One can have high as well as low credit scores based on their previous payment history. There are different credit rating scales from (AAA-D) to represent the risk and company\u2019s creditworthiness. For example, AAA refers to the lowest or no credit risk. AA denotes a very good credit rating, A refers to low credit risk, BBB refers to average credit risk, B is high credit risk or low credit rating, C denotes very poor credit rating and D is considered as Defaulted. The company\u2019s future potential should be based on current performances, profit-making projects and the ability to pay the debt.<\/p>\n Students can also find more\u00a0Advantages and Disadvantages<\/strong><\/a>\u00a0articles on events, persons, sports, technology, and many more.<\/p>\n It looks into the creditworthiness of different entities such as groups, businesses, individuals and government organizations, and also analyses the financial risk of whether or not the borrowers will be able to pay back. A good credit rating indicates good payment history and improves credibility. Agencies compile the detailed report and use it for various factors, for example in banks, investors decide about approving a loan application and other proceedings. There are differences between credit rating and credit score, credit rating determines whether an entity can make payments on time or not with such a report, a person is entitled to bank loans. Whereas in credit scores, a number between 300 and 900 is provided to individuals to rate their creditworthiness.<\/p>\n Since 1993 April, Credit Analysis and Research Private Limited have been offering credit rating services which include bank loans, debt, and recovery. Some credit rating agencies in India are Indian Rating and Research Private Limited, Credit Analysis and Research Limited, and Credit Rating Information Services of India Limited.<\/p>\n In credit rating, there are two categories of people, one is the borrower and another is the lender.<\/p>\n Credit ratings are grouped into two types:<\/p>\n There are many advantages of credit rating;<\/p>\n Disadvantages of credit rating are;<\/p>\n <\/p>\n They are as follows:<\/p>\n Question 1.<\/strong> Answer:<\/b> Question 2.<\/strong> Answer:<\/b> Question 3.<\/strong> Answer:<\/b> Question 4.<\/strong> Answer:<\/b>What is a Credit Rating? What are the advantages and disadvantages of Credit Rating?<\/h2>\n
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Role of Borrowers and Lenders<\/h3>\n
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Types of Credit Rating<\/h3>\n
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<\/a>Advantages of Credit Rating<\/h3>\n
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<\/a>Disadvantages of Credit Rating<\/h3>\n
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<\/a>Comparison Table on Advantages and Disadvantages of Credit Rating<\/h3>\n
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\n Advantages of Credit Rating<\/b><\/td>\n Disadvantages of Credit Rating<\/b><\/td>\n<\/tr>\n \n Safety and better investment decisions are assured for the lenders.<\/td>\n It has a high possibility of biases.<\/td>\n<\/tr>\n \n High credit rating means the assurance of safe money with interest on time.<\/td>\n Sometimes a company may not disclose certain important information to the investigation team of the agency.<\/td>\n<\/tr>\n \n High credit rating also shows low risk for the customers and hence banks easily approve the loan.<\/td>\n It is difficult to predict the future financial position as the data continuously changes in economic, social, legal and political\u00a0 matters.<\/td>\n<\/tr>\n \n Higher the credit rating, lower the rate of interest.<\/td>\n The difference in rating creates a great deal of confusion in the minds of investors.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n <\/a>FAQ’s on Advantages And Disadvantages Of Credit Rating<\/h3>\n
\nName a few credit rating agencies in India.<\/p>\n
\nTransunion CIBIL, Equifax, Experian and CRIF Highmark are some agencies in India.<\/p>\n
\nHow to calculate credit rating?<\/p>\n
\nIt completely depends upon the entity and what kind of records he or she has in the past and that helps in future to get loans from banks.<\/p>\n
\nWhat is an AAA rating in the bank?<\/p>\n
\nAAA rating in banks refers to the highest safety in timely servicing of financial matters.<\/p>\n
\nWhat is the full form of FICO?<\/p>\n
\nThe full form of FICO is the Fair Isaac Corporation.
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