Credit rating agencies assign credit ratings to bond issuers and to specific bonds. A credit rating can provide information about an issuer’s ability to make interest payments and repay the principal on a bond at maturity. In general, the higher the credit rating, the more likely it is – in the opinion of the rating agency – that an issuer will meet its payment obligations.
Credit ratings can change over time, so it’s a good idea to monitor the ratings of any bonds you own. If an issuer’s credit rating goes up, the price of its bonds will rise. If the rating goes down, it will drive its bond prices lower.
4 main credit rating agencies in Canada
Each agency has its own system for evaluating credit worthiness and its own way of assigning ratings:
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