Credit rating

Credit rating is a detailed assessment of the credit risk associated with a prospective applicant (an individual, a companyor government authority). The lender considers the rating to determine the applicant’s ability to repay the debt on time and the possibilities of defaulting the payment. Needless to say that a higher rating can depict healthy credit history and better possibilities of financial dealings in future.

Are credit score and credit rating the same?

Most people confuse themselves with the credit score and credit rating, though both the terms are different and works in different concept. While credit score is a numerical calculation ranging between 300 and 900, credit rating is usually conveyed in alphabetical symbols. Although, the alphabetical concept is a bit new to Indian market, it’s fast gaining popularity among the credit rating agencies.

Moreover, credit rating is generally used for the credit analysis of a business or corporate house, and not for really for individuals like us. Similar to the case of credit score, higher credit rating denotes better creditworthiness and lowest probability of default payments. Whereas, a low credit rating would be considered less creditworthy and marks high risk of default pays.

Credit rating range:

  • AAA, AA, A – Good
  • BBB, BB – Average
  • B, C, D – Low

Credit rating agencies in India:

ICRA Limited

Originally named as Investment Information and Credit Rating Agency of India Limited, ICRA Limited was established in 1991 as an independent professional credit rating agency. The agency offers detailed credit analysis ratings to different segments including Corporate Debt Rating, Financial Sector Rating, Corporate Governance Rating, Mutual Fund Rating, Project Finance Rating, etc.

CRISIL (Credit Rating Information Services of India Limited)

CRISIL is first of it’s kind credit rating agency established in 1987. It generates the prospective debtors’ detailed credit analysis based on factors such as market share, market reputation, revenue, total debt, and in-hand projects. It generally provides analysis reports to the capital and commodity markets worldwide. CRISIL currently operates across a huge global network including India, the United Kingdom, the United States, Poland, Argentina, Hong Kong, China, Singapore, and UAE.

ONICRA (OnidaIndividual Credit Rating Agency of India)

Promoted by Onida Group, ONICRA is pioneering in the credit rating services in India. It provides credit analysis and credit scoring servicesto both individuals and businesses, based on the financial strength and performance capability.

Brickwork Ratings India Private Limited

Basically, Brickwork Rating Agency is responsible to rate corporate houses such as banks, municipal corporations, capital market instrument, real estate investment, NGOs, hospitals, and SMEs, rather than rating individuals.

Brickwork Credit Ratings :

  • BWR RP 1 – Lowest credit risk
  • BWR RP 2 – Very low credit risk
  • BWR RP 3 – Low credit risk
  • BWR RP 4 – Moderate credit risk
  • BWR RP 5 – Moderate risk of default
  • BWR RP 6 – High risk of default
  • BWR RP 7 – Very high risk of default