Credit rating refers to the reputation, standing and creditworthiness of companies and individuals. In other words, it is the ability of a debtor to pay credit instalments on time and in full.
When companies or individuals borrow money from a creditor, the lender attempts to assess the risk of whether the borrower will be able to pay the loan in the future. For this, the creditworthiness is requested, and credit rating is one of the ways to measure the borrower’s ability to pay back.
For companies, the creditworthiness depends on factors such as cash flow, profitability and the equity ratio. The better these factors, the higher the credit rating, and the more favourable the debt financing. For individuals, however, the creditworthiness depends on bank statements, information from the national credit bureau and proof of income.
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