Credit standing refers to the creditworthiness of persons or companies, especially in the financial sector. First and foremost, having a very good credit rating means that a borrower is likely to be able to meet his obligations. This applies to the private borrower as well as to companies that issue bonds, for example, and thus act as an issuer. Significant is the credit rating in the financial sector so on the one hand when taking out loans and on the other with the issue of securities.
The credit rating in the loan sector
The credit rating, ie the creditworthiness, is a mandatory requirement for every bank in the loan sector to be able to grant a loan. Only on the condition that the loan seeker has a sufficient factual and personal creditworthiness, the bank can fulfill his request and lend money. The creditworthiness of customers in this country is measured by the banks, especially on the income on the one hand and the Credit bureau information on the other. In addition, in some areas of credit, such as real estate financing, there are other factors that also influence creditworthiness. In addition to the income then, for example, asset statements or balance sheets can be a tool to determine the creditworthiness.
The credit rating in the securities sector
In principle, companies that issue bonds or other securities are none other than debtors. The investor is the creditor in this case because he provides his capital – similar to a loan – to the company. Of course, investors often want to know what the issuer’s credit rating and repayment capability look like. For this purpose, there are special rating agencies, which are mainly concerned with assessing the creditworthiness of issuers. These must not only be companies, but also states as issuers of securities are valued in terms of their credit rating.