Credit rating agencies (CRA) are financial service companies that judge the repayment capacity of a company or person. It helps in the efficient working of the national and international fixed income markets. The agencies provide an independent financial analysis about credit. The 3 major credit rating agencies are Standard & Poor’s, Moody’s Investor Service, and Fitch Ratings.
Credit rating agencies differ a lot in terms of size, focus, and methodologies. A few of them concentrate on specific areas or industries. Others offer services to companies including private companies. They cannot grade the credit risks of certain fixed-income securities. Some agencies provide subsidiary business services like risk management and consulting services.
Issuers, lenders, fixed-income investors, investment banks, broker-dealers, and government regulators depend on credit ratings for different purposes. Investors use credit rating agencies to improve the selection of investment options offering independent, simple measurements of comparative credit risk. Issuers verify their own credit-worthiness independently with the ratings given by this company. Broker-dealers and investment banks depend on credit rating agencies for computing their own risk portfolios.
Credit rating agencies are hiring large number of accounting professionals and are interested in looking for more communication with independent auditors. The status of these agencies ensures the ratings are highly reliable. The agencies update their ratings annually.
The other 3 major credit rating agencies in the United States are: Experian, Equifax and TransUnion. They compute their own FICO (Fair Isaac Credit Rating Score) that use various trademark names and versions. Every version collects information independently resulting in a credit report. The reports have all the customer details and financial results.
A good credit score given by a credit rating agency will let you get approved for lower-cost mortgages. Activities of credit rating agencies are open to public and the details about rating decision are published on the Internet.