credit ratings Archives » Pinoy Money Talk

What a credit ratings upgrade means for the Philippines

Imagine your parents paying P10,000 monthly amortization to a lender for a housing loan. Let’s assume that they have been paying religiously and on time during the entire duration of the loan. On the final year of payment, the lender decided to give them a bonus, reducing the amortization to P8,000 per month as a form of goodwill.

The extra cash can now be used by your parents to put more food on the table, to pay for housing repairs and maintenance, or even to increase your weekly allowance. Regardless of where it will be put to use, the savings from the loan reduction will surely benefit your family.

Standard & Poor’s (S&P) credit ratings by country (2014)

A credit rating is a measure of the credit worthiness of a government, a public entity, or a private corporation. The credit rating is also used as an assessment of the quality of debt instruments issued by any of these organizations.

Credit Ratings by S&P, Moody’s, and Fitch Ratings

What are Credit Ratings?

Credit Ratings are a measure of the credit worthiness of an organization such as a government or a public or private corporation. It is also an assessment of the quality of debt (loan) instruments issued by these institutions. In layman’s terms, a credit rating is a score that shows the capacity of the borrowing entity to meet its financial obligations to investors.

Who are the major credit rating agencies in the world?

There are several credit rating agencies but the three major players in the world, accounting for at least 90% of the market, are Moody’s, Standard and Poor’s (S&P) and Fitch Ratings. Moody’s and S&P are based in the United States while Fitch Ratings has two headquarters, one in London and another in New York. The “Big Three” issue short-term and long-term ratings of debt papers of governments and companies worldwide and also an outlook on the assessed entity, such as positive, negative or stable.

How are credit ratings useful?