What is the definition of Credit Rating?

Credit Rating, which is also called bond rating, gives an evaluation of a borrower's ability to pay off the debts he has incurred. The credit rating is obtained from Standard & Poor's Moody's Investors Service, Fitch Ratings and other rating agencies.

Credit rating is determined by a number of factors. This includes the ratio of your bad debt (auto loan, credit cards) to your good debt (home loans), as well as your credit history and the current debt to income ratio.

Credit rating is important because this will determine the level of interest that will be used on your loan. If you have a bad credit rating, chances are that interest rates will be high. If you have a good credit rating, you will generally qualify for the standard interest rate, while if you have an excellent credit rating, you may even receive lower than standard rates for your loan.

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