Credit ratings by letter are assigned by three U.S. agencies: Standard & Poor's, Fitch, and Moody's. These rating agencies are the "big three" that investors analyze. Their ratings range from A to D with pluses and minuses applied to each to indicate how likely it is that a borrower will repay its debt.
Higher ratings come with triple letters. Grades that come with a plus are better than those with a minus.
Key Takeaways
The S&P and Fitch AAA ratings are the highest assigned to any debt issuer.
An AAA rating is the equivalent of the Aaa rating issued by Moody's.
AAA ratings are issued to investment-grade debt that has a high level of creditworthiness with the strongest capacity to repay investors.
The AA+ rating issued by S&P and Fitch is similar to the Aa1 rating issued by Moody's.
The AA+ rating comes with very low credit risk and indicates that the issuer has a strong capacity to repay its debts.
An Example of Ratings
Finance professionals were kept awake after (S&P)announced in August 2011 that it was downgrading its credit rating on the U.S. from AAA to AA+. Then Fitch followed suit on Aug. 1, 2023, also dropping the U.S. rating from AAA to AA+.
The news sent shock waves across the world in 2011 and the vibrations were felt even more the following week when the market dropped over 6% by the end of the day. But that market decline was benign compared to the individual beatings some stocks endured.
China also found itself on the chopping block on May 24, 2017, when rating agency Moody's downgraded the country's credit rating as growth slowed and debt increased. So why do people care about this and what do these ratings mean?
S&P and Fitch Ratings
Standard & Poor's and Fitch rate the debt of countries and companies based on these letter grades. The firms create their ratings from information such as annual reports, news articles, and company management. Analysts from S&P and Fitch consider a company's or country's financial situation and other determining factors.
What Does AAA Mean?
The S&P and Fitch AAA rating is the highest that can be assigned to any issuer of debt. It's the same as the Aaa rating issued by Moody's. This rating is assigned to investment-grade debt that has a high level of creditworthiness. Debt issuers with the highest ratings have the strongest capacity to repay investors. Their strong financial positions give them the lowest chance of default.
Eleven countries had the strongest AAA rating from S&P as of June 2023: Australia, Canada, Denmark, Germany, Liechtenstein, Luxembourg, Netherlands, Norway, Singapore, Sweden and Switzerland.
What Does AA+ Mean?
The AA+ rating is issued by S&P and Fitch and is similar to the Aa1 rating issued by Moody's. This rating is still of high quality but it falls below the AAA ranking. It comes with very low credit risk even though long-term risks may affect these investments.
The AA+ rating is one of the rankings for investment-grade debt. Investments that are rated with an AA+ rating are financially strong and have a strong likelihood of repaying their debts, making the chance of default very low.
The S&P and Fitch ratings for the United States still sit at AA+ with a stable outlook as of August 2023. The fact that the U.S., the world's largest economy, went from AAA to AA+ for only the second time in history is a big deal. The downgrade was painful in terms of stature. But Moody's has continued to give the country an Aaa rating, citing a stable outlook as well.
Does the U.S. Still Have an AAA Credit Rating?
Yes, at least from DBRS and Moody’s. DBRS has the U.S. rated at AAA with a stable outlook and Moody’s rating for the U.S. is Aaa with a stable outlook.
What Is the Credit Rating of the U.S.?
The U.S. credit rating is Aaa, according to Moody’s. S&P and Fitch have the U.S. rated at AA+.
When Did the U.S. Lose Its AAA Credit Rating?
The U.S. was downgraded from AAA to AA+ in August 2011 by S&P and in August 2023 by Fitch. Both agencies have cited the declining predictability of policymaking and last-minute policymaking.
The Bottom Line
The difference doesn't really seem to matter whether your investment holds an AAA or AA+ rating. What always matters in this game is valuation and patience. Sticking to the simple philosophy of buying an asset below its long-term intrinsic value should ultimately lead to satisfactory results. It's a philosophy that is indeed simple to understand yet difficult to execute for most investors.
Fitch Ratings is a credit rating agency that rates the viability of investments relative to the likelihood of default. Fitch is one of the top three credit rating agencies internationally, along with Moody's and Standard & Poor's.
and is similar to the Aa1 rating issued by Moody's.This rating is still of high quality but it falls below the AAA ranking. It comes with very low credit risk even though long-term risks may affect these investments.
S&P ratings are issued to long-term issuers of credit and insurance companies on a letter-based scale. The first rating is AAA, while the second highest is AA. Anything that falls in the A class is considered high quality, and the debt issuer has a strong likelihood of meeting its financial obligations.
'aa' ratings denote very strong prospects for ongoing viability. Fundamental characteristics are very strong and stable, such that it is considered highly unlikely that the financial institution would have to rely on extraordinary support to avoid default.
'aaa' ratings denote the best prospects for ongoing viability and lowest expectation of failure risk. They are assigned only to financial institutions with extremely strong and stable fundamental characteristics, such that they are most unlikely to have to rely on extraordinary support to avoid default.
Fitch Affirms the United States at 'AA+'; Outlook Stable. Fitch Ratings - New York - 01 Mar 2024: Fitch Ratings has affirmed the United States of America's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'AA+' with a Stable Outlook.
On August 1, 2023 Fitch downgraded USA long-term credit rating to AA+ from AAA. Following the downgrade, economists argued that higher interest rates will result in higher mortgage rates and also assert that relying on foreign financing can have risky economic implications.
AAA ratings are issued to investment-grade debt that has a high level of creditworthiness with the strongest capacity to repay investors. The AA+ rating issued by S&P and Fitch is similar to the Aa1 rating issued by Moody's.
Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
AA: An obligor rated 'AA' has very strong capacity to meet its financial commitments. It differs from the highest-rated obligors only to a small degree. Includes: AA+: equivalent to Moody's Aa1 (high quality, with very low credit risk, but susceptibility to long-term risks appears somewhat greater)
What is a good credit score for your age? You might consider your score to be good if it meets or exceeds the average for your peers, but that isn't the best gauge. Following NerdWallet's general guidelines, a good credit score is within the 690 to 719 range on the standard 300-850 scale, regardless of age.
Standard & Poor's and Fitch assign bond credit ratings of AAA, AA, A, BBB, BB, B, CCC, CC, C, D. Currently there are only two companies in the United States with an AAA credit rating: Microsoft and Johnson & Johnson.
The Big Three credit rating agencies, Moody's, Standard and Poor's (S&P) and Fitch Ratings, control around 95% of the credit ratings in the financial markets.
The highest possible rating that a bond may achieve is AAA, which is only bestowed upon those bonds that exhibit the highest levels of creditworthiness. This AAA rating is used by Fitch Ratings and Standard & Poor's, while Moody's uses a similar Aaa lettering.
For example, with S&P and Fitch, a rating of AA+ is better than AA, and a rating of AA- is worse than AA but better than A+. Moody's uses numbers to indicate relative quality, with Aa1 being the best Aa rating, followed by Aa2 and Aa3.
'AA' rated entities and instruments demonstrate very high credit quality with a very low default risk. 'A' rated entities and instruments demonstrate high credit quality with a low default risk. 'BBB' rated entities and instruments demonstrate medium credit quality with a moderate default risk.
These letter grades may also have a "+" or a "-" added by S&P to "indicate relative standing within the rating categories". This indicates that an AA+ mark is marginally superior to an AA grade. The fact that S&P utilizes a distinct scale for long-term and short-term debt is a crucial issue to keep in mind.
'AAA' rated entities and instruments demonstrate exceptional credit quality and lowest expectation of default risk. 'AA' rated entities and instruments demonstrate very high credit quality with a very low default risk. 'A' rated entities and instruments demonstrate high credit quality with a low default risk.
On 1 August 2023, Fitch downgraded the United States of America's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'AA+' from 'AAA'. The Rating Watch Negative was removed and a Stable Outlook assigned.
If you're talking about a rating from the Automobile Assocation of America (AAA), it just means that the hotel is part of the AAA network that offers a discount or has been rated by AAA.
Introduction: My name is Arielle Torp, I am a comfortable, kind, zealous, lovely, jolly, colorful, adventurous person who loves writing and wants to share my knowledge and understanding with you.
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