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What Is an A- and A3 Credit Rating?

A- and A3 are two credit ratings from different ratings agencies:

  • Standard & Poor's uses the A- rating
  • Moody's uses the A3 rating.

Both ratings indicate a relatively high level of creditworthiness.

How Do Credit Ratings Work?

Ratings agencies use credit ratings (like A- and A3) to rank the creditworthiness of specific borrowers, companies, countries, bonds, insurance policies, and more.

Credit ratings attempt to measure the probability of default. Both the A- and A3 ratings are firmly in the 'investment-grade' category, which means that they are among the safest obligations in the market.

A3 Moody’s Credit Rating

At Moody's, the A3 rating comes after the Aaa, Aa1, Aa2, and Aa3 ratings. The A rating itself denotes that whatever securities are being rated are 'upper-medium grade and are subject to low credit risk.'

The modifier 3 'indicates a ranking in the lower end of that generic category.'

A- S&P’s Credit Rating

At Standard & Poor's, the A rating follows the AAA and AA ratings, respectively. The A rating itself denotes a 'strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.'

S&P can further modify the rating by adding a + or – to show the relative standing within the major rating categories.

What Are the Effects of Credit Rating Changes?

Missed payments and loan defaults can have a substantial effect on credit ratings. And – when the ratings agencies change their ratings – the price of securities can change significantly. In some cases. These changes may even dictate whether investors can buy or sell.

For example, many institutional investors (such as pension funds) are forbidden from investing in bonds rated below investment-grade. So if a bond is downgraded from A- to 'junk' status, the fund manager would have to sell it. On the other hand, a fund manager of a junk bond might want to buy it.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.