Credit Rating Scales Compared: S&P, Moody's and Fitch Equivalents, Investment Grade Cutoff and Default Rates
Three agencies rate most of the world’s traded debt: S&P Global Ratings, Moody’s and Fitch. They use the same underlying ladder, written two different ways. S&P and Fitch use letters with plus and minus signs. Moody’s uses a different capitalisation and adds the numbers 1, 2 and 3.
This page lines the scales up notch by notch and covers the short-term scales, the default symbols, outlooks and watches, historical default rates, and the vocabulary that goes with all of it.
Long-Term Rating Scales, Notch by Notch
| Notch | S&P | Fitch | Moody’s | Category | Grade |
|---|---|---|---|---|---|
| 1 | AAA | AAA | Aaa | Prime, extremely strong capacity to pay | Investment grade |
| 2 | AA+ | AA+ | Aa1 | High grade, very strong | Investment grade |
| 3 | AA | AA | Aa2 | High grade, very strong | Investment grade |
| 4 | AA- | AA- | Aa3 | High grade, very strong | Investment grade |
| 5 | A+ | A+ | A1 | Upper medium grade, strong but more exposed to downturns | Investment grade |
| 6 | A | A | A2 | Upper medium grade | Investment grade |
| 7 | A- | A- | A3 | Upper medium grade | Investment grade |
| 8 | BBB+ | BBB+ | Baa1 | Lower medium grade, adequate capacity | Investment grade |
| 9 | BBB | BBB | Baa2 | Lower medium grade | Investment grade |
| 10 | BBB- | BBB- | Baa3 | Lower medium grade, lowest investment grade notch | Investment grade |
| 11 | BB+ | BB+ | Ba1 | Speculative, highest high-yield notch | Speculative grade |
| 12 | BB | BB | Ba2 | Speculative | Speculative grade |
| 13 | BB- | BB- | Ba3 | Speculative | Speculative grade |
| 14 | B+ | B+ | B1 | Highly speculative | Speculative grade |
| 15 | B | B | B2 | Highly speculative | Speculative grade |
| 16 | B- | B- | B3 | Highly speculative | Speculative grade |
| 17 | CCC+ | CCC+ | Caa1 | Substantial risk, currently vulnerable | Speculative grade |
| 18 | CCC | CCC | Caa2 | Substantial risk | Speculative grade |
| 19 | CCC- | CCC- | Caa3 | Substantial risk | Speculative grade |
| 20 | CC | CC | Ca | Highly vulnerable, default likely | Speculative grade |
| 21 | C | C | C | Near or in default, little recovery expected | Speculative grade |
| 22 | D (also SD) | D (also RD) | No separate symbol | In default | Default |
The investment grade line sits between notch 10 and notch 11. Ten notches above, eleven below, plus default.
Two reading rules help. Within any letter band, a plus sign or a 1 marks the strongest third, and a minus sign or a 3 marks the weakest. And the notches align one to one, so Baa2 always equals BBB.
Where the Scales Differ at the Bottom
The agencies agree closely down to CC/Ca. Default is where the notation splits.
| Situation | S&P | Fitch | Moody’s |
|---|---|---|---|
| Missed payment on all or most obligations | D | D | C (lowest rating), often with a default note |
| Default on some obligations while others are still paid | SD (selective default) | RD (restricted default) | /LD suffix added to the probability of default rating |
| Distressed exchange treated as default | SD or D | RD | /LD |
| Issuer has asked not to be rated, or rating withdrawn | NR | WD | WR |
Moody’s has no D. Its C rating already describes obligations that are typically in default with low recovery prospects.
Short-Term Rating Scales
Commercial paper and other obligations of about a year or less get a separate scale. Short-term ratings usually follow from the long-term rating, but the mapping has overlaps. The table shows the typical correspondence.
| Long-term band | S&P short-term | Fitch short-term | Moody’s short-term |
|---|---|---|---|
| AAA to AA- / Aaa to Aa3 | A-1+ | F1+ | P-1 |
| A+ / A1 | A-1+ or A-1 | F1+ or F1 | P-1 |
| A / A2 | A-1 | F1 or F1+ | P-1 |
| A- / A3 | A-1 or A-2 | F1 or F2 | P-1 or P-2 |
| BBB+ / Baa1 | A-2 | F2 (sometimes F1) | P-2 |
| BBB / Baa2 | A-2 or A-3 | F2 or F3 | P-2 or P-3 |
| BBB- / Baa3 | A-3 | F3 | P-3 |
| BB+ to B- / Ba1 to B3 | B | B | NP (Not Prime) |
| CCC+ and below / Caa1 and below | C | C | NP |
| Default | D | RD or D | NP |
Commercial paper demand is concentrated in the top two short-term tiers (A-1 / F1 / P-1 and A-2 / F2 / P-2). An issuer at A-3 or P-3 is still investment grade but finds the commercial paper market much thinner.
Outlooks and Watches
A rating’s letter tells you where it stands. The outlook or watch tells you where it might go.
| Signal | S&P term | Fitch term | Moody’s term | Typical horizon | What it means |
|---|---|---|---|---|---|
| Medium-term direction | Outlook: positive, negative, stable, developing | Rating Outlook: positive, negative, stable, evolving | Outlook: positive, negative, stable, developing | S&P about 6 months to 2 years; Fitch 1 to 2 years; Moody’s about 12 to 18 months | A change is possible over the horizon but not under active review |
| Near-term review | CreditWatch: positive, negative, developing | Rating Watch: positive, negative, evolving | Review for upgrade, review for downgrade, direction uncertain | Usually resolved within about 90 days (Fitch watches can run up to about 6 months) | A specific event or analysis is under way and a rating action is likely soon |
Watches carry more signal than outlooks. Historically a majority of negative watch placements have been resolved with a downgrade.
Historical Default Rates by Rating
Ratings are relative rankings of default risk, not guaranteed probabilities. The long-run data still shows how steep the ladder is. The figures below are S&P Global Ratings’ global corporate average cumulative default rates for 1981 to 2009, one of the agency’s most widely cited datasets. Later annual studies through 2024 show the same shape.
| Initial rating | 1 year | 3 years | 5 years | 10 years | 15 years |
|---|---|---|---|---|---|
| AAA | 0.00% | 0.14% | 0.39% | 0.82% | 1.14% |
| AA | 0.02% | 0.14% | 0.33% | 0.74% | 1.02% |
| A | 0.08% | 0.35% | 0.72% | 1.97% | 2.99% |
| BBB | 0.26% | 1.23% | 2.53% | 5.60% | 8.36% |
| BB | 0.97% | 5.27% | 9.51% | 17.45% | 21.57% |
| B | 4.93% | 15.65% | 22.30% | 30.82% | 35.74% |
| CCC/C | 27.98% | 42.40% | 48.05% | 53.41% | 57.28% |
| All investment grade | 0.13% | 0.60% | 1.24% | 2.80% | 4.04% |
Three things stand out.
The investment grade cutoff is a real break in the data. Ten-year cumulative defaults roughly triple between BBB and BB.
Short horizons flatter the middle of the scale. Over one year a BB issuer looks safe at under 1%. Over fifteen years, about one in five defaulted.
The top two categories are statistically hard to tell apart. With so few defaults at AAA and AA, a single event moves the numbers, which is why AA can show lower cumulative rates than AAA at some horizons.
Rating Vocabulary
| Term | Meaning |
|---|---|
| Investment grade | Rated BBB- / Baa3 or higher. Eligible for most pension, insurance and bank investment mandates |
| Speculative grade | Rated BB+ / Ba1 or lower. Also called high yield, non-investment grade or junk |
| Fallen angel | An issuer or bond downgraded from investment grade to speculative grade |
| Rising star | An issuer or bond upgraded from speculative grade to investment grade |
| Crossover credit | An issuer rated around the BBB- / BB+ boundary, often split across it |
| Split rating | Two agencies rate the same issuer or bond at different notches |
| Issuer rating | An opinion on an entity’s overall creditworthiness |
| Issue rating | An opinion on a specific bond, which can sit above or below the issuer rating depending on seniority and security |
| Notching | Rating a specific debt instrument above or below the issuer rating to reflect its position in the capital structure |
| Sovereign ceiling | The tendency for companies to be rated no higher than their home country, because of transfer and convertibility risk |
| NRSRO | Nationally Recognized Statistical Rating Organization, the US SEC designation held by S&P, Moody’s, Fitch and several smaller agencies |
| Unsolicited rating | A rating assigned without the issuer’s request or participation |
| Selective or restricted default | A default on some obligations while others continue to be paid (S&P SD, Fitch RD) |
| Distressed exchange | A debt swap on terms worse than the original, which agencies usually treat as a default |
The US Sovereign Rating: Three Downgrades
The United States held the top rating at all three agencies for decades. Each one moved it down a single notch, years apart.
| Agency | Date | From | To | Top rating held |
|---|---|---|---|---|
| S&P Global Ratings | August 2011 | AAA | AA+ | Held AAA since 1941 |
| Fitch Ratings | August 2023 | AAA | AA+ | Held AAA from its first US rating |
| Moody’s | May 2025 | Aaa | Aa1 | Held Aaa since 1917 |
After the Moody’s action, all three agencies rated the United States at notch 2 on the scale. Sovereign ratings are reviewed regularly, so check the agencies directly for the current position.
How to Read a Rating Quickly
| Question | Where to look |
|---|---|
| Is it investment grade? | BBB- / Baa3 or higher |
| How close is it to the line? | Count notches from notch 10 in the first table |
| Is it moving? | Outlook for the medium term, watch or review for the near term |
| Do the agencies agree? | Compare all three. A split across the BBB- / BB+ line is usually treated by investors as the lower rating |
| Is it the company or the bond? | Issuer ratings and issue ratings can differ by one or more notches |
| Is it in default? | D or SD at S&P, D or RD at Fitch, C or an /LD marker at Moody’s |