Credit Rating
An assessment of a borrowers creditworthiness and the probability of loan default is called a credit rating. Large organizations like governments, corporations are given this credit rating. These organizations’ financial health is evaluated by credit rating agencies.
Credit Score
Conversely, a credit score is a numerical description of a organization creditworthiness. It is usually determined by taking into account a number of different variables about organizations, including utilization of credit, length of credit history, payment history. Peoples are assigned credit scores , which fall between 300 and 850.
Key Differences:
- Scope of Assessment: Many large organizations use credit ratings, whereas individuals use credit scores.
- Issuer: Credit reporting agencies such as Equifax, and TransUnion generate the credit scores, credit rating companies are the ones who issues credit ratings for individuals and organizations after assessing their creditworthiness.
- Scale: While credit scores are measured on a numerical scale from300 to 850, credit ratings are measured on letter-grade system.
- Purpose: A credit scores help lenders to determine an individuals credit risk for loans and credit cards, credit ratings help investors analyze the risk of investing in bonds or financial instruments.
A Credit ratings and credit scores play a crucial role in the financial sector’s decision-making process when it comes to financing extensions and investments. Both credit ratings and credit scores for evaluation of a person’s creditworthiness; they have various uses and apply to different types of organization – credit scores are for individuals, while credit ratings are for larger organizations.
