What is Credit Quality?
One of the principal criteria for judging the investment quality of a bond or bond mutual fund. As the term implies, credit quality informs investors of a bond or bond portfolio’s credit worthiness, or risk of default.
Also known as a “”bond rating.”” Read more for examples and further explanation including related video clips and also comments
Example explains Credit Quality
An individual bond or bond mutual fund’s credit quality is determined by private independent rating agencies such as Standard & Poor’s, Moody’s and Fitch. Their credit quality designations range from high (‘AAA’ to ‘AA’) to medium (‘A’ to ‘BBB’) to low (‘BB’, ‘B’, ‘CCC’, ‘CC’ to ‘C’).
Investors interested in the safety of their bond investments should stick to investment grade bonds (‘AAA’, ‘AA’, ‘A’, and ‘BBB’), while other investors willing and able to accept a higher level of risk could consider lower credit-quality bonds.
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