Credit rating is a metric used by banks and lending institutions to check whether a borrower can repay the loan or not with proper interest. These agencies analyze customers spending with credit history thoroughly before preparing their credit ratings. Some of them focus on individual credit ratings while some focus on big entities like national banks, large-cap companies, and sometimes even countries.
Credit rating can be further divided into two categories, i.e. short-term credit rating and long-term credit rating. Short-term credit rating evaluates the likelihood of sanctioning a loan of a small amount for fewer installments. On the other side, long-term credit rating determines the sanctioning of loans of larger amounts for a longer duration of time. Having a good credit rating helps in getting a loan with favorable interest rates when you need one.
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