Editing Debt (section)

=== Role of rating agencies ===
{{See also|Criticism of credit scoring systems in the United States}}
[[Credit bureaus]] collect information about the borrowing and repayment history of consumers.  Lenders, such as banks and credit card companies, use [[credit scores]] to evaluate the potential risk posed by lending money to consumers. In the United States, the primary credit bureaus are [[Equifax]], [[Experian]], and [[TransUnion]].

Debts owed by governments and private corporations may be rated by [[Credit rating agency|rating agencies]], such as [[Moody's]], [[Standard & Poor's]], [[Fitch Ratings]], and [[A. M. Best]]. The government or company itself will also be given its own separate rating. These agencies assess the ability of the debtor to honor his obligations and accordingly give him or her a [[credit rating]]. Moody's uses the letters ''Aaa Aa A Baa Ba B Caa Ca C'', where ratings ''Aa-Caa'' are qualified by numbers 1-3. S&P and other rating agencies have slightly different systems using capital letters and +/- qualifiers. Thus a government or corporation with a high rating would have Aaa rating.

A change in ratings can strongly affect a company, since its cost of [[refinancing]] depends on its [[creditworthiness]]. Bonds below Baa/BBB (Moody's/S&P) are considered [[High-yield debt|junk]] or high-risk bonds. Their high risk of default (approximately 1.6 percent for Ba) is compensated by higher interest payments. Bad Debt is a loan that can not (partially or fully) be repaid by the debtor. The debtor is said to [[Default (finance)|default]] on their debt. These types of debt are frequently repackaged and sold below face value. Buying junk bonds is seen as a risky but potentially profitable investment.