01What Are Credit Ratings?

Credit ratings are forward-looking opinions on the relative ability of an entity or obligation to meet financial commitments. Our credit ratings are intended to provide comparability across sectors, and forward-looking risk analysis, with the aim of achieving ratings stability through cyclical shocks. Ratings are assigned based on criteria developed to capture expectations regarding foreseeable events and their effects on such factors as cash flows, reserves, funding or capital. To learn more, visit our rating definitions page or glossary.

What Credit Ratings Mean

Fitch’s risk analysis is forward-looking, with the aim of achieving stability in its ratings through cyclical shocks. Rating changes are intended to reflect shifts in fundamentals for the rated entity or its sector rather than cyclical or transitory changes in credit quality.

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Ratings Process

To arrive at a rating opinion, Fitch follows standardized procedures to ensure a globally consistent approach to its rating processes. To learn more, visit our ratings process page.

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Fitch Ratings Updates Its Rating Definitions

02Fundamental Questions

Vulnerability to Default Versus Vulnerability to Loss: What Measures What?

Fitch’s credit ratings focus on vulnerability to default, i.e. vulnerability to an event that causes the first missed payment of interest or principal. This is the focus of issuer ratings across non-structured ratings, and transaction ratings across structured and infrastructure asset classes. This differs from ‘expected loss’ as a target, which incorporates both default and recovery expectations.

In our view, cross-asset ratings comparability and information is best accomplished by focusing on likelihood of the binary event of default. This is a pure approach to measuring risk and maximises transparency. This is especially the case when there is limited visibility on potential recovery prospects, notably for highly rated issuers where default is considered to be a remote event. Note that the 10-year ex-post default experience for all Fitch-rated corporate finance is below 4%, and for investment grade –comprising 10 separate rating steps –is less than 1.8%.

In some asset classes, obligation ratings also consider vulnerability to loss through notching to reflect specific recovery expectations. These obligations can be for debt classes, deposit claims, insurance claims or other classes or streams of obligation. The obligation rating is determined by notching up from the issuer rating for above-average recovery expectations and notching down for below-average recovery expectations.

Rating Scale Application

Forward-Looking vs. Cyclicality? Loss?

Fitch’s risk analysis is forward-looking, with the aim of achieving stability in its ratings through cyclical shocks. Rating changes are intended to reflect shifts in fundamentals for the rated entity or its sector rather than cyclical or transitory changes in credit quality. If deterioration in credit quality is temporary, for example, due to a fall in commodity prices, Fitch may maintain the rating on the basis that the issuer or instrument would return to the expected rating metrics.

This concept is illustrated in the chart below depicting two ‘BBB’ rated corporate issuers. Company A suffers a temporary cyclical change in its credit profile but ultimately emerges from the downturn phase with its credit profile preserved. However, Company B suffers a structural change to its credit profile during the downturn so that it emerges weaker than before. Company B is likely to be downgraded as the structural change in credit profile becomes apparent, but Company A would be expected to retain its rating because Fitch views the change to its credit profile as temporary and cyclical.

03How Are Credit Ratings Assigned?

Corporate Issuer

Corporate Rating Criteria: Overview

Fitch Ratings provides a summary of how the agency assigns issuer ratings to corporates across sectors and regions.

Rating Criteria Synopsis

Corporate Rating Criteria: Financial Adjustments and Ratios

An overview of our framework for main adjustments that we apply in Fitch’s Corporate rating criteria and financial ratios, and how they feed into our analysis.

Rating Criteria Synopsis

Structured Finance and Covered Bonds Country Risk Rating Criteria

Fitch Ratings provides a summary of how the agency considers country risk in its structured finance and covered bond ratings.

Rating Criteria Synopsis

Covered Bonds Rating Criteria

Fitch Ratings provides a summary of the Covered Bonds ratings criteria and process.

Bank Rating Criteria Series

Bank Rating Criteria – Part 1

This video provides an overview of Fitch’s Rating Framework, how it is structured and the main characteristics of issuer-level ratings for banks. Click here to see our full series of Bank Rating Criteria videos, which include:

  • Viability Ratings
  • Support Ratings
  • Deposit Ratings
  • Subordinated and Hybrid Debt Ratings

Rating Criteria

Rating Criteria explains our forward-looking ratings approach. Criteria reports identify rating drivers and assumptions, and highlight the scope and limitations of our analysis.

04Ratings in Numbers


Fitch has compiled a range of sector and market-specific resources to guide readers through both the basics and finer points of various assets classes through a credit lens.


Structured Finance Encyclopedia

Created for newcomers to the asset class, or those looking to review the basics, our guide covers the fundamentals of the sector, key risk factors, regulatory considerations and more.


ESG Encyclopedia

Our comprehensive ESG Encyclopedias provide insights on the credit relevance and materiality of sector-specific environmental and social credit issues. Vol. 1 focuses on environmental issues, including air quality and biodiversity, and Vol. 2 focuses on social issues, including labor issues and customer-related issues.


ESG in Credit

In our ESG in Credit white paper, we outline our approach to evaluating ESG risks in all our rated sectors and highlight key trends and patterns.

06Products and Tools

Providing forward-looking insights as well as in-depth information, Fitch Ratings products and tools allow investors to identify risks, understand credit trends, and leverage data for success in today's complex markets. Our tools include:

07Want to Learn More About Credit Markets?

Enhance your market understanding with Fitch Learning:

Fitch Learning

Continued Learning for Investors

Fitch Learning

Expand your Bank Analysis and Modeling Skills

Fitch Learning

Explore additional credit market resources and educational tools, with our Fitch Learning center. Our learning solutions leverage expert faculty, e-learning, coaching and blended candidate assessments, improving individual contribution and collective business performance.

08Ratings Definitions Glossary

All Credit Ratings

Country Ceilings are expressed using the symbols of the long-term issuer primary credit rating scale and relate to sovereign jurisdictions also rated by Fitch on the Issuer Default Rating scale. They reflect the agency’s judgment regarding the risk of capital and exchange controls being imposed by the sovereign authorities that would prevent or materially impede the private sector’s ability to convert local currency into foreign currency and transfer to non-resident creditors — T&C risk.

Foreign Currency Ratings additionally consider the profile of the issuer or note after addressing T&C risk. This risk is usually communicated for different countries by the Country Ceiling, which caps the foreign currency ratings of most, though not all, issuers within a given country.

International credit ratings relate to either foreign currency or local currency commitments and, in both cases, assess the capacity to meet these commitments using a globally applicable scale.

Issuer Default Ratings opine on an entity’s relative vulnerability to default (including by way of a distressed debt exchange) on financial obligations. The threshold default risk addressed by the IDR is generally that of the financial obligations whose non-payment would best reflect the uncured failure of that entity. As such, IDRs also address relative vulnerability to bankruptcy, administrative receivership or similar concepts.

Local Currency International Ratings measure the likelihood of repayment in the currency of the jurisdiction in which the issuer is domiciled and hence does not take account of the risk that it will not be possible to convert local currency into foreign currency or make transfers between sovereign jurisdictions (transfer and convertibility [T&C] risk).

National ratings are a measure of relative credit risk among issuers in a country or monetary union. They express creditworthiness across the full range of the credit rating scale, using similar symbols to those used for international ratings. However, to assure differentiation between the two scales, a two- or three-letter suffix is appended to the national rating to reflect the specific nature of the national scale to the country concerned.

Ratings of individual securities or financial obligations of a corporate issuer address relative vulnerability to default on an ordinal scale. In addition, for financial obligations in corporate finance, a measure of recovery given default on that liability is also included in the rating assessment.

Recovery Ratings are assigned to selected individual securities and obligations, most frequently for individual obligations of corporate finance issuers with IDRs in speculative grade categories. The Recovery Rating scale is based on the expected relative recovery characteristics of an obligation upon the curing of a default, emergence from insolvency or following the liquidation or termination of the obligor or its associated collateral.

A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-Term Ratings are assigned to obligations whose initial maturity is viewed as “short term” based on market convention (a long-term rating can also be used to rate an issue with short maturity). Typically, this means up to 13 months for corporate, sovereign, and structured obligations and up to 36 months for obligations in U.S. public finance markets.

Financial Institutions

Derivative Counterparty Ratings are issuer level ratings and address only Fitch’s opinion on a bank’s relative vulnerability to default, due to an inability to pay on any derivative contract with third-party, non-government counterparties

Government Support Ratings (GSRs) and Shareholder Support Ratings (SSRs) reflect Fitch’s opinion on the likelihood that, in case of failure, a bank or non-bank financial institution will receive extraordinary support from government sources (GSR) or its shareholders (SSR) to prevent it defaulting on its senior financial obligations to third-party, non-government creditors. They indicate the minimum level to which an issuer’s Long-Term IDRs could fall if Fitch does not change its view on potential support.

Insurer Financial Strength Ratings provide an assessment of the financial strength of an insurance organization. The IFS Rating is assigned to the insurance company’s policyholder obligations, including assumed reinsurance obligations and contract holder obligations, such as guaranteed investment contracts. The IFS Rating reflects both the ability of the insurer to meet these obligations on a timely basis.

Viability Ratings measure the intrinsic creditworthiness of a bank or non-bank financial institution , and reflect Fitch’s opinion on the likelihood that the entity will fail.

Rating Outlooks and Watches

Outlooks indicate the direction a rating is likely to move over a one- to two-year period.

Rating Watches indicate that there is a heightened probability of a rating change and the likely direction of such a change. A Rating Watch is typically event-driven, and as such, it is generally resolved over a relatively short period.

Rating Actions and Reviews

Assignment (New Rating): A rating has been assigned to a previously unrated issuer or issue.

Affirmations: The rating has been reviewed with no change in rating through this action. Ratings affirmations may also include an affirmation of, or change to, an Outlook when an Outlook is used.

Bank Individual Ratings: Bank Individual Ratings were assigned on a scale of A through F. These ratings assessed how a bank would be viewed if it were entirely independent and did not rely on external support. Bank Viability Ratings are now assigned.

Criteria Observation Removed: UCO can be addressed and removed by a subsequent rating action such as affirmation, upgrade or downgrade; with these actions, the annual review requirement is also met. Where a rating action has not been taken, a Criteria Observation Removed action may be taken if it has been determined that the rating would not change due to the application of the new

Data Actions: Data Actions refer to actions taken on individual issuers or issues that denote the assignment or change of a rating but do not imply any change in the credit quality of the entity or issue.

Database Add: Initial rating listed in Fitch’s database, though not necessarily the first rating assigned.

Distressed Recovery Rating Revision: Change to an issue’s “Distressed Recovery Rating” that is independent of its long-term or short-term rating. The term Distressed Recovery Ratings exists only in rating history. These were replaced by Recovery Ratings as of 2009. Recovery Ratings for structured finance transactions were withdrawn in November 2011.

Downgrade: The rating has been lowered in the scale.

Historical Actions: In the evolution of the ratings process, Fitch has employed actions designed to meet a single purpose. These actions remain in rating history but are not expected to be re-used.

Loss Severity Rating Revision: Change to an issue’s Loss Severity Rating that is independent of its long-term or short-term rating.

Matured/Paid-In-Full: ‘Matured’ — Denoted as ‘NR’. This action is used when an issue has reached its redemption date and rating coverage is discontinued. This indicates that a previously rated issue has been repaid, but other issues of the same program (rated or unrated) may remain outstanding. For the convenience of investors, Fitch may also include issues relating to a rated issuer or transaction that are not and have not been rated on its section of the web page relating to the respective issuer or transaction. Such issues will also be denoted ‘NR’.

Outlook Revision: Outlook revisions (e.g. to Rating Outlook Stable from Rating Outlook Positive) are used to indicate changes in the ratings trend. In structured finance transactions, the Outlook may be revised independently of a full review of the underlying rating. An Outlook revision may also be used when a series of potential event risks has been identified, none of which individually warrants a Rating Watch but which cumulatively indicate heightened probability of a rating change over the following one to two years. A revision to the Outlook may also be appropriate where a specific event has been identified that could lead to a change in ratings, but where the conditions and implications of that event are largely unclear and subject to high execution risk over a one- to two-year period.

Paid-In-Full: Denoted as ‘PIF.’ This action indicates that an issue has been paid in full. In covered bonds, PIF is only used when all issues of a program have been repaid.

Pre-refunded: Assigned to certain long-term U.S. public finance issues after Fitch assesses refunding escrow.

Publication (Publish): Initial public announcement of a rating on the agency’s website, although not necessarily the first rating assigned. This action denotes when a previously private rating is published. In cases where the publication coincides with a rating change, Fitch will only publish the changed rating. The rating history during the time when the rating was private will not be published.

Rating Confirmations: A rating has been reviewed at the request of the rated entity or its representatives to confirm that there would be no rating effect from a proposed limited change to specific terms or other provisions or circumstances in relation to an entity, its issues or a transaction. A rating confirmation does not constitute a rating action. The provision of rating confirmations is at Fitch’s sole discretion and the outcome may be communicated via a ratings confirmation letter and/or a Non-Rating Action Commentary (NRAC).

Rating Modifier Actions: Modifiers include Rating Outlooks and Rating Watches.

Rating Watch On: The issue or issuer has been placed on active Rating Watch status.

Rating Watch Maintained: The issue or issuer has been reviewed and remains on active Rating Watch status.

Rating Watch Revision: Rating Watch status has changed.

Recovery Rating Revision: Change to an issue’s Recovery Rating. In cases where a modification has been made to correct an erroneous rating that was published on the Fitch Ratings website as the result of a clerical error, the rating history will be corrected as applicable and labelled as a ‘Rating Correction’ with the date the correction was made.

Review- No Action: The rating has been reviewed by a credit rating committee with no change in rating or Outlook. As of the review date, the credit rating committee determined that nothing had sufficiently changed to warrant a new rating action. Such review will be published on the agency’s website, but a RAC will not be issued.

Revision Enhancement: Some form of the credit support affecting the rating opinion has been added or removed.

Revision IDR: Issuer’s long-term or short-term rating has been converted to an Issuer Default Rating. This action is used in cases where the change does not denote an upgrade or downgrade.

Revision MMF: Rating has been revised to denote money market fund through addition of MMF suffix. Action was completed in January 2010.

Revision Outlook: Rating Outlook status for any non-structured finance rating has changed, reflecting a full review of the underlying rating. It is the equivalent of Outlook Revision, which is the term for this type of rating of action currently used.

Revision Rating: Rating has been modified for reasons that are not related to credit quality, such as to reflect the introduction of a new rating scale. This action is also used for National Rating changes driven purely by a recalibration of a National Ratings Equivalency Table.

Support Floor Rating Revision: Applicable only to Support Ratings related to financial institutions, which are amended only with this action.

Under Criteria Observation: The rating has been placed “Under Criteria Observation” upon the publication of new or revised criteria that is applicable to the rating, where the new or revised criteria has yet to be applied to the rating and where the criteria could result in a rating change when applied but the impact is not yet known. Under Criteria Observation (UCO) is not a credit review and does not affect the rating level or Outlook/Watch, and does not satisfy the minimum annual review requirement. Placing a rating on UCO signals the beginning of a period during which the new or revised criteria will be applied. Where there is heightened probability of the application of the new or revised criteria resulting in a rating change in a particular direction, a Rating Watch may be assigned in lieu of the UCO to reflect the potential impact of the new or revised criteria. The status of UCO will be resolved after the application of the new or revised criteria, which must be completed within six months from the publication date of the new or revised criteria. UCO is only applicable to private and public international credit ratings. It is not applicable to National Ratings, Non-Credit Scale Ratings, Credit Opinions or Rating Assessment Services. It is not applicable to ratings status Paid in Full, Matured, Withdrawn or Not Rated.

Upgrade: The rating has been raised in the scale.

Under Review: Applicable to ratings that may undergo a change in scale not related to changes in fundamental credit quality. Final action will be "Revision Rating". A Rating Action or Review must be recorded for each rating in a required cycle to be considered compliant with Fitch policy concerning aging of ratings. Not all Rating Actions, Data Actions, or changes in rating modifiers, meet this requirement. Actions or Reviews that meet this requirement are noted with an * in the definitions.

Withdrawn: The rating has been withdrawn and the issue or issuer is no longer rated by Fitch. When a public rating is withdrawn, Fitch will issue a RAC that details the current rating and Outlook or Watch status (if applicable), a statement that the rating is withdrawn and the reason for the withdrawal. Withdrawals cannot be used to forestall a rating action. Every effort is therefore made to ensure that the rating opinion upon withdrawal reflects an updated view. Where significant elements of uncertainty remain (for example, a rating for an entity subject to a takeover bid) or where information is otherwise insufficient to support a revised opinion, the agency attempts when possible to indicate in the withdrawal disclosure the likely direction and scale of any rating movement had coverage been maintained. Ratings that have been withdrawn will be indicated by the symbol ‘WD’.

Withdrawn — Pre-refunded: Indicates a pre-refunded issue no longer carries an underlying rating in cases where Fitch is not asked to re-rate the issue based on the refunding escrow.