What Does AAA Credit Rating Mean?

AAA is the highest rating for a bond.

The three major bond-rating agencies in the United States are Fitch, Moody's and Standard and Poor's. All three agencies give an AAA, or triple A, rating to bonds offered by companies that present the lowest credit risk.

Credit Risk

Companies that have AAA-rated bonds are ones in which the bond rating agencies believe have the best ability to meet their financial obligations. These companies possess little risk of defaulting on any of their debt payments and are in good financial standing.

Forward Looking

Bond rating agencies look to a company's ability to meet its current, as well as future, financial obligations, meaning, the ratings are forward looking. A company with an AAA rating is deemed to be financially stable, and the bond rating agencies see little probability the company will be unable to pay its debt in the future.

Business Standing

A company with an AAA bond rating is generally in good business standing, and is not experiencing any negative major corporate scandals or investigations. If a company with an AAA bond rating is experiencing a scandal that may affect its financial standing, the bond rating agency may downgrade the company's bond.

References

• Moody's: Understanding Moody's Corporate Bond Ratings and Ratings Process
• Standard and Poor's: Credit Ratings, Definitions and FAQ's
• Fitch Ratings: Understanding Credit Ratings: Limitations and Usage