Credit Rating

Credit rating (also credit score, risk rating or risk score) is a quantified evaluation of the credit risk of a prospective borrower. Credit rating conveys the information on the borrower’s predicted ability to pay back the loan and, conversely, the borrower’s likelihood of default. In P2P lending, platforms might rate individual borrowers. Still, the risk score is more often assigned to loan originators and/or individual loans (e.g., two loans for the same borrower might have different credit ratings depending on the risk/ feasibility of the exact endeavour). Credit ratings are usually quantified on a 5-star scale or denominated with letters (A or A+ being the least risky).