When it comes to understanding your financial credibility, terms like credit rating and credit score are often used interchangeably. However, they’re not the same.
While both reflect how trustworthy you are with borrowed money, they serve different purposes and are used by different entities. A credit score is assigned to individuals, while a credit rating evaluates companies or governments.
If you’re applying for a loan, a credit score matters more. But if you’re investing in corporate bonds, you’ll want to check the credit rating. This article breaks down the difference between credit rating and credit score in simple terms.
Difference Between Credit Score and Credit rating
1. Credit score vs credit rating: What they are
In simple terms, credit agencies give credit ratings to corporations and even governments after assessing if they can meet their financial commitments. Thus, credit ratings indicate to lenders the entity’s loan repayment ability. Different credit agencies have slightly different methods for calculating credit ratings.
Credit scores, unlike credit ratings, are the individual’s loan repayment ability typically expressed in numbers. But just like credit ratings, different organizations offer credit scores to individuals based on their calculation methods.
If “what is the difference between credit score and credit rating” isn’t clear yet, perhaps the next point will come to your aid.
2. Credit score vs credit rating: How they are determined
Credit agencies like CRISIL, ICRA, Fitch, CARE and ONICRA give entities credit ratings based on their financial statements, borrowing and lending behaviour and credentials. They offer two types of credit ratings – speculative and investment-grade credit ratings.
Speculative credit ratings are offered to people or organizations making high-risk transactions. But investment grade credit ratings, on the other hand, are handed out to individuals making solid investments and are likely to repay the dues on time.
On the other hand, credit agencies determine credit scores after considering an individual’s credit history, new credit acquired, the mix of credit types, and more. Unlike credit ratings, credit scores are calculated the same way, no matter the type of investment. Only the nature of scoring depends on the credit agency calculating your credit score.
Thus, how the values for the credit score and credit rating are determined is one of the major differences between credit rating and credit score.
3. Credit rating vs credit score: What are the limits
Credit ratings are typically defined on a limited rating scale. In India, they are expressed in a letter-grade format. The highest rating is AAA, followed by AA, A, BBB, BB, B, all the way until D or default. Some credit agencies also add + or – to the ratings instead of repeating the letters. Naturally, the highest credit rating on a credit scale is AAA, while D is the lowest.
Credit scores, in contrast, are typically expressed numerically on a scale starting from 300 going all the way up to 900. The greater the numerical value, the higher the creditworthiness of the individual.
Looking for more differences between credit score and credit rating? Perhaps, the following pointer will help you with it.
4. Credit rating vs credit score: How to increase it
Whether you have a credit rating of C or a credit score of 500, you can increase them over time. The way to do it is by maintaining a good credit history and improving creditworthiness. Let us first see how you can boost your credit rating and increase your credit score individually.
Since the credit rating represents the creditworthiness of an entity, maintaining a stable credit history is a good way to increase it. So, pay off the business bills on time, lower your credit balance by paying off your debts, pay the business loan EMIs on time, and remember to keep your old business credit cards active to add to your credit history. Doing all of this will boost the credit rating over time.
Blurring the difference between credit score and credit rating further, increasing the credit score is similar to increasing credit rating. One can focus on maintaining good credit behaviour and expect their credit score to grow over time. Paying off unpaid credit card bills, keeping debts to a minimum, repaying outstanding loans on time, and checking the credit report periodically for errors, can all increase your credit score over time.
Key Differences: Credit Rating vs. Credit Score
So, what is credit rating and what is credit score? What is the difference between a credit score and a credit rating? The following table answers these questions.
Aspect
Credit Score
Credit Rating
Purpose
Used by individuals to get loans or credit cards and determine applicable interest rates.
Helps investors and lenders assess the risk of lending to or investing in a company or government.
Frequency of Change
Changes often based on credit activity like payments, utilisation, or new accounts.
Reviewed less frequently, usually yearly or when a major financial event affects the entity.
Granularity
Offers detailed insights into personal credit behaviour, including repayment history and credit inquiries.
Gives an overall view of a company’s or government’s financial health, based on various qualitative and quantitative factors.
Accessibility
Individuals can check their scores via credit reports or monitoring services, often free or via subscriptions.
Publicly accessible via financial media or credit rating agency websites like CRISIL, ICRA, or S&P.
Influence on Investment
Impacts personal finance and borrowing terms.
Heavily influences investment choices, especially for bonds, mutual funds, and other instruments tied to government or corporate debt.
Conclusion
The above table should give a clear answer to the question – “what is the difference between credit score and credit rating”. Now that you know it, you can confidently keep track of your credit history and maintain a high credit rating or score.
If you’re looking to get a loan in the meanwhile for personal reasons, you can turn to Tata Capital. We offer personal loan at terms convenient to you. Visit our website to learn more.
You can improve your credit score by paying bills on time, reducing credit card balances, avoiding unnecessary loans, and regularly monitoring your credit report for errors.
Does Checking Your Credit Report Affect Your Credit Score?
No, checking your own credit report is a soft inquiry and does not impact your credit score. It’s a good practice to review it regularly for accuracy.
Does Opening New Credit Affect Your Credit Score?
Yes, applying for new credit triggers a hard inquiry, which may slightly lower your score temporarily. Too many applications in a short time can impact it further.
How can a business enhance its credit rating?
To enhance its credit rating, a business should maintain timely repayments, reduce outstanding debt, maintain healthy financials, and build positive relationships with lenders. This will improve the business’s overall creditworthiness and credit rating.
Are there different types of credit scores and ratings?
Yes, individuals have credit scores from bureaus like CIBIL or Experian, while businesses and governments receive credit ratings from agencies like CRISIL, ICRA, or S&P.
What distinguishes a credit score from a credit rating most fundamentally?
A credit score applies to individuals and reflects personal credit behaviour, while a credit rating evaluates the credit risk of businesses or governments on a broader financial scale.
08 May 2025
5 mins read
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