Credit Rating is a measure of the ability of a business entity to repay a financial obligation. A good credit rating is very important when you apply for a loan. While it helps quantify the creditworthiness of your business, it also plays a role in helping the lender determine what rate of interest is to be levied.
Credit rating is provided by credit rating agencies which determine whether the entity will be in a position to pay back the loan amount on time.
While the calculation of credit rating might differ from agency to agency, some major factors remain consistent all through the process. Length of credit history, credit utilization rate and credit exposure are some of the main influencers.