Legal Definitions - credit rating

Definition: A credit rating is an assessment of a person's or company's ability to repay debt. It is created by a credit bureau at the request of a lender.

Example: Let's say you want to borrow money from a bank to buy a car. The bank will ask a credit bureau to evaluate your credit rating. The credit bureau will look at your credit history, income, and other factors to determine if you are likely to repay the loan on time.

Another example: A company wants to borrow money from investors to expand its business. The investors will ask a credit rating agency to evaluate the company's credit rating. The agency will look at the company's financial statements, credit history, and other factors to determine if the company is likely to repay the loan.

These examples illustrate how credit ratings are used by lenders and investors to assess the risk of lending money. A high credit rating indicates that the borrower is likely to repay the loan on time, while a low credit rating indicates that the borrower may have difficulty repaying the loan.