Credit Rating A credit rating is a simple number which many lenders use to determine whether or not they will

give a loan or line of credit to an individual. One's credit rating is impacted by a number of factors, some of which are controllable, others of which are not. There are three main agencies lenders go to in order to acquire an individual's credit rating: TransUnion, Equifax, and Experian. Many lenders get two or more reports, as details may differ among the agencies. Opinions differ as to which of the agencies is the best or most accurate, with factions holding strong opinions on both sides for all three of the major agencies. The formula used by these three agencies is known as FICO, named after the Fair IsaacCredit Organization, one of the first companies to begin using credit ratings in the 1950s. A FICO score is a number ranging from 300 to 900, and roughly approximates the risk an individual poses to a lender. A rating of 300 is considered extremely high risk, while 900 indicates virtually no risk. a credit rating around 500 is high enough risk that many lenders will refuse a line of credit, and those that do grant one will penalize the borrower with highinterest rates and difficult terms. A credit rating above 850 will grant the lowest possible interest rates and a very small down payment where applicable. A credit rating of over 650 is good enough to get favorable terms and virtually always be accepted for new lines of credit. Many organizations offer online access to your credit rating. These sites offer reports from all three major agencies, detail why your score may be low, and offer suggestions for how to improve it. This ready access to one's credit rating information has led to the emergence of many online forums and communities in which members encourage and assist one another in raising their credit ratings.

Given the importance of favorable interest rates and terms particularly on large creditlines, such as mortgages it is well worth investing the time and small sum of money involved in acquiring access to your credit rating. By the end of September 2005, everyone will be able to get one free copy of one's credit report from each of the three major agencies. In fact, in many states, consumers already have this right. Even people with a relatively strong credit rating (above 700) will find marked improvements in terms as they raise theircredit rating.

Definition of 'Credit Rating' An assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities Credit is important since individuals and corporations with poor credit will have difficulty finding financing, and will most likely have to pay more due to the risk of default.

A credit rating service is a financial services firm that collects financial information about individuals and organizations and analyzes it to provide an evaluation of the credit-worthiness of those about whom the data is collected. In the United States, a credit rating service generally will concentrate either on businesses or on individuals. Most companies that extend credit, whether for individual consumers, businesses or other organizations, rely heavily on the information and evaluation provided by credit rating services when making the decision to extend credit. In the US, there are three credit rating services for consumer credit: Experian, Trans Union, and Equifax. Each credit rating service maintains files on nearly all Americans who have any history at all of using or applying for credit. It's rare that an American won't have a file maintained by each of these three companies, because any application for credit generally will trigger a request for a credit report from one (or more) of the companies. When such a request is received for a consumer for whom no file exists, the credit rating service will automatically start one.

In addition to collecting data, a credit rating service will analyze and evaluate the data in order to provide creditors and potential creditors with a reliable indicator of of the consumer's creditworthiness. In the US, they each use formulas based on the Fair Isaac model of credit risk measurement to produce a credit rating, or score, which is included with the credit report. In many cases, creditors will base their decision almost exclusively on the score itself, making it crucial that the data used in producing the score be accurate. Consumers are advised to conduct their own due diligence by monitoring the credit reportsissued about them by each of the three consumer credit rating services. American law now provides that credit rating services must provide free copies of their credit reports annually to consumers requesting them. Consumers may challenge any inaccurate data found in their reports. The credit-worthiness of companies, governments, and other organizations seeking credit is also evaluated by special financial services companies, the most widely-known of which are Standard & Poor's, Moody's, Dun and Bradstreet, and A.M. Best. Some of these commercially-oriented credit rating services concentrate on specific industries; A.M. Best, for example, issues comprehensive financial reports, including scores, on companies in the insurance business. While the services rendered by credit rating agencies have benefited both creditors and consumers, some problems have arisen. One of the more controversial issues is the difficulty successfully disputing inaccurate information found in a consumer credit file; another is the abuse of the system committed by those intent on committing credit fraudand identity theft. In addition, no real standard exists for reporting to credit rating agencies by creditors. Some creditors will report all of a consumer's activity, including both on-time as well as late payments, while some creditors will report only the late payments. A third group of creditors generally won't report positive or adverse information, using the threat of an adverse report to persuade a consumer to pay a bill, and then making an adverse report only when the consumer doesn't pay.

Credit ratings and what they mean Standard and Poor is one of the four major credit rating agencies in the world who specialise in evaluating credit risk. A credit rating agency gives a forward-looking opinion about the creditworthiness of a borrower with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program.

A rating takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. Issue of credit ratings can be either long term or short term depending on the nature of the obligations. In the US, for example, that means obligations with an original maturity of no more than 365 daysincluding commercial paper.

The United States, which till now enjoyed the highest credit rating of AAA from S&P, has just seen a down grade for the first time in ithe countrys history to AA+, which means very strong capacity to meet financial commitments. Indias current credit rating by S&P is BBB- (BBB minus), which, according to S&P definitions is considered lowest investment grade by market participants. Despite the weak rating, S&P in its statement said We expect Indias fiscal consolidation to continue in the next few years, supported by a strong growth momentum. The stable outlook reflects our view that Indias external flexibility and fiscal performance will temper the effects of inflation and political uncertainty.

Different agencies use different symbols and definitions for credit ratings and their ratings for the same entity can also vary.

The definition of ratings The general meaning of S&Ps credit rating opinions is summarised below:

AAA: Extremely strong capacity to meet financial commitments. This the highest Rating.

AA: Very strong capacity to meet financial commitments.

A: Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.

BBB: Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.

BBB-: Considered lowest investment grade by market participants.

BB+: Considered highest speculative grade by market participants.

BB: Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.

B: More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.

CCC: Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.

CC: Currently highly vulnerable.

C: Currently highly vulnerable obligations and other defined circumstances.

D: Payment default on financial commitments. (Note: Ratings from AA to CCC are often modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.)

Credit rating process

Step I: Decision and documents Step II: Rating Presentations meetings, conference calls, and /or site visits

Step III: Rating Committee, communication, press release, report

Appeal process, if necessary

Surveillance

Following major factors are assessed in the Credit RatingProcess: Industry RiskMarket PositionOwnership & SupportEarning & PerformanceCash FlowsManagement EvaluationCapital & Debt StructureFunding & FlexibilityCorporate GovernanceAdditional Factors for Financial Institutions

I - Industry Risk Economic importance of the industry to the country.Potential for support.Employment significance.Industrial relations record.Significance of legislation: protective and harmful, relationship withgovernment.Maturity of the industry.International competition.Barriers to entry.Competitive situation domestically: monopoly, oligopoly, fragmentation.Nature of the industry: capital intensity, product lifespan, marketingrequirements.Cyclic factors: demand, supply, implications for price volatility.Industry cost and revenue structure: susceptibility to energy prices,interest rate levels, government policies.Important developments and trends in the industry. II - Market Position: Competitive position within the industry: size, market share &trend, price-setting ability.Major product importance.Product lives and competition.Degree of product diversification.Significance of R&D expenditure and of new productdevelopment.Geographic diversity of sales and production.Significance of major customers.Dependence on major suppliers and access to alternatives.Marketing needs.Distribution network, control and susceptibility to externalfactors. III Ownership & Support The specific issues include: Ownership of the entity.Relationship with owners, autonomy, control. Financial strength of owner (s). Potential for support or for funds withdrawals. Structure of ownership. Other benefits: access to technology, products. Access to capital markets. V- Earnings & Performance The specific issues include:Consistency and trend of core earnings.Earnings mix by activity and geography.Exceptional and extraordinary items: non-recurring impacts onpast earnings levels.True earnings levels available for cash flow: equity accounting,restrictions on profit repatriation. Internal growth versus acquired earnings.

IV- Earnings & Performance Profitability and protection measures.Profit margins.Interest & pre-tax coverage measures.Dividend cover, payment levels and future policy.Taxation situation: effective tax rate, specific relief.Sufficiency of retained earnings to finance growth internally. V Cash Flows Relationship of cash flow to leverage and ability to internally meetall cash requirements is evaluated. The volatility of cash flowover time and the impact of seasonality on cash flow is alsoassessed.The specific issues include :Adequacy of cash flow to maintain the operating capacity of thebusiness: working capital levels, replacement of fixed assets.Contribution from cash flow towards expansion: major capitalspending projects, acquisitions.Discretionary spending included in cash flow includingadvertising, exploration, research & development expenditure.Volatility of cash flow over time.Relationship between cash flow and total debt.Restrictions on cash flow : limits on repatriation, potentialtaxation effects, access to dividends from subsidiaries.Liquidity levels and fluctuations: seasonality, sensitivities.Working capital management and measurements. VI Management Evaluation The specific issues include:Record to date in financial terms. Corporate goals and outlook: aggressive stance, attitude to risk. Experience, background, credibility. Depth of management: key individuals, succession. Record compared with peers. VII Capital & Debt Structure The specific issues include:Debt/Equity measures: historic, present and projected.Leverage (total liabilities/equity) measures: historic, present andprojectedSensitivity Analysis on projected levelsSeasonal variationsCoverage measures on interest & leasingAdjustments for off-balance sheet items.Appropriateness of capital structure for the business: over-reliance on short term funding, sensitivity to interest ratechanges.Debt Structure: Type, maturity, currency, service schedule,covenants, security, default clause.

VIII Funding & Flexibility The specific issues include:Flexibility of planned financial needs : capital spending, dividendlevels, acquisitions.Ability to raise additional financing under stress.Back-up and standby lines of credit : periods and covenants of underwriting facilities and committed lines, bank relationshipsgenerally.Ability to attract capital : shareholder make-up, access to equitymarkets.Capital commitments. IX Corporate Governance The independence and effectiveness of the board of directorsOversight of related party transactions that may lead to conflicts of interest. Board oversight of the audit function. Executive and director remuneration. Complex holding company structures. Ownership by private individuals and families. Also examine other aspects of corporate governance whose impact onbondholders is less clear cut; these include equity ownership byexecutives and directors X -Additional Factors for Financial Institutions Quality of the asset portfolioStability of earningSources and cost of fundsAsset / liability structureCapital adequacy and liquidityMarket environment and strategyProspects

CRISIL Credit Rating and Information Services of India Ltd. (CRISIL) (BSE: 500092, NSE: CRISIL) is India's leading Ratings, Research, Risk and Policy Advisory Company based in Mumbai.CRISILs majority shareholder is Standard & Poor's, a division of The McGraw-Hill Companies and the world's foremost provider of financial market intelligence. CRISIL pioneered ratings in India more than 20 years ago, and is today the undisputed business leader[citation needed], with the largest number of rated entities and rating products: CRISIL's rating experience covers more than 45000 entities, including 30,000 small and medium enterprises (SMEs).[citation needed] CRISIL offers domestic and international customers (CRISIL Global Research and Analytics consisting of Irevna and Pipal Research caters to international clients) with independent information, opinions and solutions related to credit ratings and risk assessment; energy, infrastructure and corporate advisory; research on India's economy, industries and companies; global equity research; fund services; and risk management. ICRA ICRA created a content description system which allowed webmasters and digital content creators to self-label their content in categories such as , language (vulgar terms etc.), violence, other potentially undesired material and online interactivity such as social networking and chat. There are context variables such as art, medicine and news. A key point is that ICRA does not rate internet content, nor do they make value judgements about sites the content providers selflabel, and then parents and other concerned adults make a decision as to what is or is not appropriate for themselves or their children. The labelling was done using a web-based questionnaire. The content creators checked which of the elements in the questionnaire are present or absent from their Web sites, and a small file is automatically generated using the RDF format, which is then linked to the content on one or more domains. Formerly, the system was based on PICS.

Users, especially parents of young children, could then use content filtering software to allow or disallow various types of content. One such application, ICRA plus, was maintained by ICRA itself. ICRA also had a validator which tested all versions of ICRA .The descriptive vocabulary was drawn up by an international panel and designed to be as neutral and objective as possible. It was revised in 2005 to enable easier application to a wide range of digital content, not just websites. The ICRA also intended to launch a service to verify the accuracy of ICRA labels and to provide this information to third-party tools and services, such as search engines. Alternative labelling projects include Quatro, an EU-funded project which integrates content labels with quality and trust marks, and its successor, QuatroPlus.

CARE CARE Ltd, is a credit rating and information services company promoted by IDBI jointly with investment , banks and financial companies . the company started is operation in oct.1993 and announced it1st rating in 1993