Understanding credit ratings

Our credit rating system communicates forward-looking opinions of how issuers or financial obligations across all geographies and asset classes will perform over time. 

Navigating credit ratings

As capital markets become increasingly global and interconnected, investors face an extensive and often bewildering selection of investment opportunities. Learn how Moody's Ratings provides insights on the relative credit risk of financial obligations across industries and asset classes around the globe.

Credit rating scale

Credit ratings assigned on our global long-term and short-term rating scales are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public-sector entities. Moody's Ratings issues ratings at the issuer level and instrument level on both the long-term scale and the short-term scale. The following is information about Moody's Ratings' long-term and short-term rating scales.

Long-term ratings are assigned to issuers or obligations with an original maturity of eleven months or more and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment.

Aaa

Obligations rated Aaa are judged to be of the highest quality subject to the lowest level of credit risk.

Aa

Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

A

Obligations rated A are judged to be  upper-medium grade and are subject to low credit risk.

Baa

Obligations rated Baa are judged to be medium grade and subject to moderate credit risk; and as such may possess certain speculative characteristics.

Ba

Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.

B

Obligations rated B are considered speculative and are subject to high credit risk.

Caa

Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.

Ca

Obligations rated Ca are highly speculative and are likely in,  or very near, default, with some prospect of recovery of  principal and interest.

C

Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody’s Ratings appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a midrange ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect both on the likelihood of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment.

P-1

Ratings of Prime-1 reflect a superior ability to repay short-term obligations.

P-2

Ratings of Prime-2 reflect a strong ability to repay short-term obligations.

P-3

Ratings of Prime-3 reflect an acceptable ability to repay short-term obligations.

NP

Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

Integration of sustainability into credit risk

Moody’s Ratings’ credit analysis seeks to incorporate all issues that can materially impact credit quality, including sustainability and physical and transition risk, and aims to take the most forward-looking perspective that provides visibility into these risks and mitigants permits.

Sustainability classification

Our classification reports describe how we define and categorize environmental, social, and governance considerations that are material to credit quality.

Read more

Heat maps

How does sustainability materiality vary across sectors?

Heat maps provide relative rankings of environmental and social risks across global sectors.

Environmental risk heat map

Social risk heat map

Credit ratings and research

Our sustainability general principles methodology, first published in January 2019, formalized our approach for incorporating sustainability considerations into our credit ratings. We updated the methodology to further explain our integration of sustainability in credit analysis, particularly through our sustainability scores.

View methodology

Rating methodologies

Access all our rating methodologies

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Explore an interactive, high-level introduction to Moody’s Ratings’ use of sector-specific methodologies for assigning credit ratings

Sovereign methodology overview

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