Advantages of Credit Rating
Credit ratings rate a debtor’s ability to pay back the debt by making timely payments and also the likelihood of default. Credit ratings are important for borrowers to gain loans and credit card when the need arises. It is essential for you to have a high credit rating as this is what will enable you to acquire loans from the different financial institution. Importance of credit ratings are explained below.
Investors can make a good decision with access to credit ratings of the company they want to invest in. It gives an investor an idea of how much they should invest in a company and the risk involved. An investor decides to invest more amount in a company is influenced by high credit ratings. Good credit ratings allow an investor to invest higher amounts knowing that his money is in good hands while lower credit rating will discourage an investor from investing.
Credit ratings influence how the public will view a company. The image of the company improves through high credit ratings as the investor feel safe while investing in the company. When investors feel safe and comfortable to invest in a company, the company can get investors without a struggle when the need arises and thus enjoy a good market image. With higher credit ratings a company works hard to maintain its image and thus the company is safe from bankruptcy boosting investor confidence.
Investors do not have to
spend so much time and effort trying to study the financial status of a company as the company’s credit ratings gives a good idea about the company’s financial strength. Investors can depend on a credit rating done professionally to make an investment decision. Credit ratings give direct information about the company’s financial strength, and it is easy to understand saving the investor time to research. This makes it for investors to make a quick decision as the access of credit rating saves them time from researching a company’s financial strength.
Credit ratings also enable companies to have a wider audience for borrowing for instance banks, financial institution, and investing companies. Since credit ratings can be understood not only by the financial institution but also by the public, it is easy for a company to acquire a loan with a high credit rating.
A company’s marketing status can also be assisted through credit ratings. A higher credit rating boosts the image of the company to the general public. Higher rating in the company improves the image of the company and investors feel confident and safe about their investments. Through a high credit rating, a company works extra hard to maintain its image and thus improves the company’s market. Through good ratings a company marketing tool go higher as a good image is created to the general public.