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Advantages of Credit Rating

It is through credit rating that a debtors ability to timely make interest payment is determined. Credit ratings are important for borrowers to gain loans and credit card when the need arises. Good credit rating allow individuals to borrow money from financial institutions easily and if your credit ratings are poor it is easy for a financial institution to reject your request for a loan. Importance of credit ratings are explained below.

It is through credit rating that investors make decisions whether or not they can invest in accompany. With access to credit rating, an investor can find out the risk involved if they decide to invest in the company in question. The higher the credit rating of a company the more willing an investor will be to invest in that company. 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 also help in improving corporate image. High credit ratings creates confidence and trust in the mind of investors about a company thus boosting the corporate image. Higher credit ratings, therefore, boost the company’s image and improve how the public views them. Companies with great credit rating motivates a company to maintain it’s good financial status and this will protect the company from bankruptcy and therefore investors will be safe.

Since credit ratings define a company’s financial strength an investor does not have to go through the financial information of a company. This is because an investor can depend on the ratings done by a professional rating agency to take 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. An investors time is saved being able to go through the company’s credit rating enables them to make an informed decision on the money to invest.

Credit ratings also enable companies to have a wider audience for borrowing for instance banks, financial institution, and investing companies. With the help of credit rating a company can easily borrow capital since credit ratings give clear information about their financial strength.

A company’s marketing status can also be assisted through credit ratings. High credit ratings enable a company to develop a good image to investors, customers and suppliers. Higher rating in the company improves the image of the company and investors feel confident and safe about their investments. It is through improved marketing of a company that it can maintain a good financial structure and thus maintain higher credit ratings. Higher credit rating is advantageous to a company as it ensures investors feel safe and secure and improve the marketing tool of the company.

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