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According to Wikipedia “the credit rating assesses the credit worthiness of a corporation. It is analogous to credit ratings for individuals and countries. The credit rating is a financial indicator to potential investors of debt securities such as bonds. These are assigned by credit rating agencies, such as Standard & Poor’s and have letter designations such as AAA, B, CC.” There are five corporations in the United States that are watched over by the SEC with their credit ratings.

There is Fitch, A.M. Best, Dominion Bond Rating Service, Standard & Poor’s, and Moody’s. Out of all of the agencies Moody’s, Standard & Poor’s and Fitch are the largest in the market. Each assigns a different bond credit ratings for example Moody’s credit ratings are Aaa, Aa, A, Baa, Ba, B, Caa, Ca, and C. The other credit agencies such as Fitch and Standard & Poor’s bond credit ratings are AAA, AA, A, BBB, BB, B, CCC, CC, C, and D. Each company can also assign intermediate rating such as BBB+- etc.

According to Wikipedia “as of 2005, there are only nine companies rated AAA by all three major bond credit agencies:

1. Automatic Data Processing
2. Berkshire Hathaway
3. Exxon Mobile
4. General Electric
5. Johnson and Johnson
6. Pfizer
7. Toyota Motor Corporation
8. United Parcel Service
9. Northwestern Mutual Financial Network.

When going over these credit ratings from the credit agencies you have to be careful of a few things. Out of the three biggest rating agencies S&P, Moody’s, and Fitch have a lot of market push. For example there was a report made on Moody’s credit rating for Hannover, which is a large German Company, which was written by Alec Klein of the Washington Post. Hannover had been rated by two different rating agencies and did not want to pay for Moody’s rating with can be $50,000 to $300,000.

Moody still rated the company as an “unsolicited” rating. While the other raters gave Hannover positive ratings Moody’s rating was negative and caused the selling of Hannover’s shares which lost them $175 million dollars that day. So even though Hannover received a positive rating from two other companies, the rating from Moody’s was watched by the investors more than the others. The problem with this scenario is that an unsolicited rating does not give anything more to what you already know about the company, because the credit rating agency got their information from public sources.

The companies that have more volume of ratings then others do not mean that they have stronger credit. The purpose of these ratings is to give you a different view of the company. For instance Standard & Poor’s rating may be different from Fitch’s rating and Fitch does not necessarily take precedence over the other. Also, the ratings depend largely on the company being honest with its investments such as Enron and WorldCom. Even though the credit agencies had access to these companies and gave good ratings the companies were not honest which lost the investors their money.