The ABCs of Credit Ratings

If you invest in bonds, notes, or other debt instruments, you have probably come across credit ratings. these credit ratings usually appear in the form of alphabetical letter grades (for example, ‘AAA’ and ‘BBB’) and are intended to give you an estimation of the relative level of credit risk of a bond or a company or government as a whole.

Credit ratings can be a useful item of information to consider when evaluating an investment along with other information. But if you use credit ratings, you should understand their limitations. You should not base your investment decision solely on a credit rating or treat a credit rating as if it were investment advice.