M-com Part II

PROECT
BY
DHANASHREE SHIRKE
ROLL NO : 4033
SUBJECT : CREDIT RATING
Table Of Content :

 Credit Rating.
 Importance of Credit Rating.
 Steps In Credit Rating.
 Credit Rating Agency.

 Credit Score.
 Credit Rating.
 A Credit Rating is an evaluation of the credit risk of
a prospective debtor (an individual,
a business, company or a government), predicting their
ability to pay back the debt, and an implicit forecast of
the likelihood of the debtor defaulting. The credit
rating represents an evaluation of a credit rating
agency of the qualitative and quantitative information
for the prospective debtor, including information
provided by the prospective debtor and other non-
public information obtained by the credit rating
agency's analysts.
 Importance of Credit Rating
 For The Money Lenders
 Better Investment Decision: No bank or money lender companies would
like to give money to a risky customer. With credit rating, they get an idea about the
credit worthiness of an individual or company (who is borrowing the money) and the
risk factor attached with them. By evaluating this, they can make a better investment
decision.

Safety Assured: High credit rating means an assurance about the safety of the
money and that it will be paid back with interest on time.

For Borrowers
Easy Loan Approval: With high credit rating, you will be seen as low/no risk
customer. Therefore, banks will approve your loan application easily.

Considerate Rate of Interest: You must be aware of the fact every bank offers
loan at a particular range of interest rates. One of the major factors that determine the
rate of interest on the loan you take is your credit history. Higher the credit rating, lower
will the rate of interest.
Steps Involved In Credit Rating
 Credit Rating Agency
A credit rating agency (CRA) is a company that rates debtors on the
basis of their ability to pay back their interests and loan amount on time
and the probability of them defaulting. These agencies may also analyze
the creditworthiness of debt issuers and provide credit ratings to only
organizations and not individuals consumers.

Individual customers are rated by specialized agencies known as credit

bureaus that provide a credit score to every customer based on his/her
financial history.

Credit rating agencies in India do not have a distant past. They came
into existence in the second half of the 1980s. As of now, there are
six credit rating agencies registered under SEBI namely, CRISIL, ICRA,
CARE, SMERA, Fitch India and Brickwork Ratings. Ratings provided
by these agencies determine the nature and integrals of the loan. Higher
the credit rating, lower is the rate of interest offered to the organisation.
 Credit Score
What does a credit score mean?
A credit score is a numeric representation of your credit history. It is
comprised of five components that have associated weights:

Payment history: 35%

Amounts owed: 30%

Length of credit history: 15%

How many types of credit in use: 10%

Account inquiries: 10%

Lenders use your credit score to evaluate your credit risk – generally,
the higher your credit score, the lower your risk may be to the lender.
 Credit Score Range

What is Bad, Good, & Excellent Credit?

The most popular credit scoring system in the United States is

based on the FICO (Fair Isaac Corp.) range. This scoring range
starts at 300 as the poorest score and goes up to 850 as the
highest range possible, or excellent credit. Specifically, bad
credit ranges from 300 to 629, fair credit ranges from 630 to
689, good credit ranges from 690 to 719, and finally, excellent
credit which ranges from 720 and to 850.
What is in a Credit Score ?
 QUESTIONNAIRE FOR EMPLOYEE OF
BANK OF BARODA

DO CUSTOMER ENQUIRE ABOUT CREDIT RATING

OF INSTRUMENTS?

7, 47%
8, 53%

NO
YES
WHICH INSTRUMENT CREDIT RATING IS
DONE?

1
1

13

LOAN DEBT INSTRUMENT BOND

WHICH CREDIT RATING AGENCIES RATE
YOUR BANK?

12

CRISIL CARE
THANK YOU