The power of credit ratings
Credit ratings shape economic prospects. A higher rating unlocks opportunities. A lower rating can impose financial challenges.
CREDIT RATINGS VS. CREDIT SCORES: A POWER RELATIONSHIP
Credit ratings are benchmarks for institutional investors to price credit risk exposures. In the modern context they are money-proxies, however some ratings are not valid money-proxies.
Credit scores (or rankings, or indices) are quality benchmarks used in lending to individuals and small borrowers.
A score becomes a rating when it has a monotonic mapping to a probability of default or perfect coincidence. Only then can it be legitimately used as a money proxy.
If you are interested in understanding more about the informational design elements of Clean Fintech ratings, see What Is A Rating?
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Modernizing the Credit Layer and Leading Sustainability
