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Long-Term Rating

A long-term rating is a credit rating assigned by agencies such as Standard & Poor's, Moody's, or Fitch that evaluates the creditworthiness of a borrower over an extended period, typically more than one year. These ratings assess the likelihood that a borrower, such as a corporation or government, will meet its financial obligations in the long term. A higher long-term rating indicates a lower risk of default, while a lower rating suggests higher risk.

Example

A company with an AA long-term rating from S&P is considered a low-risk borrower, as the rating reflects its strong ability to meet long-term financial obligations.

Key points

• A credit rating that assesses a borrower’s ability to meet financial obligations over an extended period (more than one year).

• Provided by agencies like Standard & Poor's, Moody's, or Fitch.

• A higher rating indicates lower default risk, while a lower rating suggests higher risk.

Quick Answers to Curious Questions

It assesses the creditworthiness of a borrower over a long period, typically beyond one year, focusing on their ability to meet financial obligations.

Investors use long-term ratings to evaluate the risk of lending to or investing in a borrower, with higher-rated entities considered safer.

A low long-term rating indicates higher risk, potentially leading to higher borrowing costs and reduced investor confidence.