Question

A personal credit rating can have a significant impact on an individual’s life and future; the same relationship can be applied to a corporation and its bond rating. Students have learned that a bond is rated based on its credit risk. As most U.S. corporations have some kind of debt financing, what actions can a firm take to keep its bond rating as high as possible and thus positively affect the cost of its long-term financing? Do people do similar things to keep their own credit ratings high?

Answer 1

When it comes to corporations, one major step that they can take to ensure high bond rating is maintaining a high degree of Corporate Governance. Corporate Governance basically ensures transparency that enables strong development. This is visible from a fair board representation, the actions of the board, and the policies of the organization.

When it comes to personal credit rating, there are a mix of things that play role :

Past history of loan portfolio

On time payments

Average Outstanding

Income

Ofcourse these measures reflect the same way for an organization, in terms that these points directly point towards the company policies & performance.