Accounting Dictionary

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Credit Rating Agency

Definition: A credit rating agency is a company that reviews the creditworthiness of an entity that is in the process of or has already issued debt.  If a credit rating agency issues a high credit score, then investors will likely accept a lower effective interest rate on the debt. Since debt issuers pay the credit rating agencies, there is a perceived conflict of interest in their credit scores.

The best-known credit rating agencies are Moody's, Standard & Poor's, and Fitch.