Credit ratings are kinder to businesses than people

If ratings agencies treated businesses as they treat people, many of our big banks wouldn’t have been able to get credit for a number of years. But as it is, an institution can be rated B today and AAA in 6 months time, by contrast an individual rated as bad credit will need about 2 years to change their credit rating to good credit. There are positives to a credit rating taking a long time to recover; it teaches the credit holder to be responsible and to maintain their good reputation.

For the banks the incentive quite as big; some that failed during the credit crisis now already have good ratings, if this level of kindness was extended to ordinary borrowers, bankruptcy rates would increase. So why can’t ratings agencies apply the same methods to corporations? It might have saved us all from the crush.

At breadmarket, a site for consumers about credit rating methods, we give tips that people can use to rid themselves of bad credit.