24 Hour Loans glossary of financial terms

Average Credit Quality

The average credit quality is used within the investment sector to show the general credit ratings of specific products such as a group of bonds, for example. The credit rating of a bond will show the risk involved with buying it.

Credit ratings are set by companies such as Standard & Poor?s and Moody?s. Their rating system works on an alphabetical format with A at the top. Basically the higher the rating given (i.e. AAA), then the lower risk an individual bond is perceived to be. So you may see a credit rating of AAA, A, B or BBB for example. A bond that has a credit rating below a certain classification is usually described as a junk bond. The average credit quality is used for a group or portfolio of different bonds ? this rating basically averages and weights all the ratings for the bonds in question to show the risk attached to the portfolio as a whole.