Fitch Ratings
A leading provider of credit ratings, commentary, and research
What Is Fitch Ratings?
Fitch Ratings is a leading provider of credit ratings, commentary, and research. Known for being a multinational credit rating organization with offices in London and New York City.
Investors utilize the company's ratings to identify investments with a low default rate and high return. Fitch bases the ratings on a number of variables, including the type of debt a company has and how sensitive it is to macroeconomic shifts like interest rates.
Fitch Ratings offers global perspectives shaped by strong local market experience and credit market expertise. It is dedicated to providing value beyond the rating through independent and prospective credit opinions.
Fitch Group is a global leader in financial information, providing critical insights that inform better decision-making in financial markets. With operations in more than 30 countries, Fitch Group comprises:
- Fitch Ratings is a global leader in credit ratings and research.
- Fitch Solutions is an authority in credit and macro intelligence providing fixed-income products and services to the global financial community.
- Fitch Learning is a preeminent source of training and professional development.
Hearst Corporation, a leader in diversified media, information, and services, owns Fitch Group. If you are an investor looking for reliable and objective information about the credit quality and default risk of different types of investments, then you may have come across Fitch ratings.
Fitch ratings provide forward-looking credit opinions that reflect its expectations of credit behavior over a range of scenarios.
Key Takeaways
- Fitch's individual credit score matters because it can affect your ability to access credit and obtain favorable terms for loans, mortgages, credit cards, and other financial products.
- A higher credit score indicates a lower risk of defaulting on your obligations and a higher likelihood of repaying your debts on time. It can also help you qualify for lower interest rates and fees, higher credit limits, better rewards programs, and more flexible repayment options.
- Some of the ways to improve your credit score include paying your bills on time and in full every month, keeping your credit utilization ratio below 30%, avoiding applying for too many new accounts, reviewing your credit reports for errors, diversifying your types of credit, and maintaining a long and positive credit history.
Understanding Fitch's rating
Fitch ratings are a system for rating investments' credit quality and default risk, such as corporate bonds and sovereign debt. Fitch uses a letter system that ranges from AAA (very high quality) to D (defaulted).
Fitch also assigns modifiers (+ or -) to AA through CCC ratings to indicate relative differences within each category. For example, AA+ is higher than AA, and AA is higher than AA-.
Fitch ratings are based on a comprehensive analysis of various factors, such as financial performance, business profile, industry outlook, governance, legal environment, and macroeconomic conditions.
Fitch ratings are divided into two main categories:
1. Investment grade: Relatively low to moderate credit risk.
2. Speculative grade: Either a higher level of credit risk or a default has already occurred.
The following table summarizes the meaning of each rating category (Source: Fitch Ratings):
| Rating | Definition |
|---|---|
| AAA | Highest credit quality; lowest expectation of default risk |
| AA | Very high credit quality; very low default risk |
| A | High credit quality; low default risk |
| BBB | Good credit quality; adequate capacity to meet financial commitments; moderate default risk |
| BB | Speculative; faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions; elevated default risk |
| B | Highly speculative; material default risk is present; adverse business, financial, or economic conditions will likely impair capacity or willingness to meet financial commitments |
| CCC | Substantial credit risk; default is a real possibility |
| CC | Very high levels of credit risk; default of some kind appears probable |
| C | Exceptionally high levels of credit risk; default is imminent or inevitable |
| RD | Restricted default; indicates an issuer that has experienced a default on one or more of its obligations but continues to operate |
| D | Default; indicates an issuer that has failed to meet its financial obligations. |
But who uses Fitch? Fitch ratings are used by investors, issuers, intermediaries, and businesses by:
- Investors to assess the financial stability and risk of prospective investments, compare investment opportunities, and make informed decisions based on their risk appetite and return expectations
- Issuers to access capital markets and attract investors by demonstrating their creditworthiness and transparency.
- Intermediaries to facilitate.
How are Fitch ratings assigned?
Fitch ratings are assigned by a team of analysts who conduct a thorough and independent assessment of the issuer or issue under review. The process follows a certain pattern:
- The rating process begins when an arranger, issuer, sponsor, or underwriter contacts a member of Fitch’s Business Relationship Management (BRM) group with a request to engage Fitch.
- The BRM group then assigns an analytical team based on the sector and geography of the issuer or issue.
- The analytical team collects relevant information from various sources, such as public disclosures, financial statements, regulatory filings, market data, industry reports, and meetings with management.
- The analytical team then applies Fitch’s rating criteria and methodologies to evaluate the issuer or issue credit profile and assign a rating recommendation.
- The rating recommendation is then presented to a rating committee of senior analysts and managers with relevant expertise and experience.
- The rating committee reviews the analytical team’s work and challenges their assumptions and conclusions, then votes on the final rating decision and publishes it on Fitch’s website along with a rating action commentary that explains the rationale behind the rating.
Fitch ratings are subject to ongoing monitoring and review by the analytical team and the rating committee. Accordingly, Fitch may revise or withdraw a rating at any time based on new information or changes in circumstances that affect the issuer.
Fitch may also place a rating on Rating Watch or assign an Outlook to indicate a potential direction of change in the rating over a short-term (Rating Watch) or medium-term (Outlook) horizon.
How does Fitch’s individual credit score work?
While Fitch Ratings' main focus is on corporate and sovereign ratings, it also offers “individual credit scores for consumers.”
Credit bureaus such as Experian, Equifax, and TransUnion use a form of Fair Isaac Corporation (FICO) credit scoring to calculate these scores.
FICO scores range from 300 to 850 and are based on various factors such as payment history, credit utilization, length of credit history, types of credit, and new credit inquiries and are widely used by lenders to assess the creditworthiness of borrowers and determine the interest rates and terms of loans.
Fitch Ratings does not directly provide individual credit scores to consumers. Instead, it provides credit reports and monitoring services through its subsidiary “Fitch Solutions.”
Fitch Solutions also provides “Fitch Connect,” a platform that allows users to access Fitch Ratings' data and research on over 10,000 banks, 2,000 non-bank financial institutions, 20,000 corporates, 200 sovereigns, and 800 sub-sovereigns.
Fitch Solutions also offers Fitch Credit Reports, which are comprehensive reports that include personal information, public records, credit accounts, inquiries, collections, and bankruptcies.
Fitch Credit Reports are available for individuals in the United States and Canada. Additionally, Fitch Solutions offers “Fitch Credit Monitoring,” a service that alerts users to changes in their credit reports and scores. Fitch Credit Monitoring is available for individuals in the United States only.
Why does Fitch Individual Credit Score Matter?
Fitch individual credit score matters because it can affect your ability to access credit and obtain favorable terms for loans, mortgages, credit cards, and other financial products.
Why does credit score matter? A higher credit score indicates a lower risk of defaulting on your obligations and a higher likelihood of repaying your debts on time. Conversely, a lower credit score indicates a higher risk of defaulting on your obligations and a lower likelihood of repaying your debts on time.
A higher credit score can help you qualify for lower interest rates and fees, higher credit limits, better rewards programs, and more flexible repayment options.
A lower credit score can result in higher interest rates and fees, lower credit limits, fewer rewards programs, and more stringent repayment options. A lower credit score can also affect your ability to rent an apartment, get a cell phone plan, or even get a job.
Some of the ways to improve your credit score include:
- Paying your bills on time and in full every month.
- Keeping your credit utilization ratio (the percentage of your available credit that you use) below 30%.
- Avoid applying for too many new accounts or inquiries in a short period of time.
- Reviewing your credit reports for errors and disputing them if needed.
- Diversifying your types of credit (such as revolving and installment).
- Maintaining a long and positive credit history.
By following these tips, you can improve your Fitch individual credit score over time and enjoy the benefits of having good credit.
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