Credit Ratings vs. Credit Scores
What is the difference between a credit rating and a credit score?
A credit rating is an opinion as to an entity’s capability and willingness to pay its obligations upon maturity. A credit rating is typically prospective. A rating agency usually has a particular rating methodology that it follows but it is rare that specific weights are given to the different aspects to be considered.
A credit score, on the other hand, is a quick indicator for an entity’s credit standing. Usually based on historical data, companies who give such scores, come up with a “points” system which will allow them to give a score to a particular entity under review. Specific points may be given to aspects like number of years in operation, market position in the industry, etc. The chosen factors are seen to be the aspects that have been identified, historically, to determine whether a borrower is a good credit or not.