What Is Moody’s?

Moody’s Explained in Less Than 4 Minutes

Definition
Moody’s Corporation is a financial services company that owns Moody’s Investors Service and Moody’s Analytics.
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Moody’s Corporation is a financial services company that owns Moody’s Investors Service and Moody’s Analytics.

Moody’s Investor Service is a credit rating agency that provides investors with credit ratings for debt. Moody’s Analytics provides software and tools that help with risk analysis and economic research.

Learn how Moody’s can be a useful tool to help investors, organizations, and government entities understand and evaluate potential risk.

Definition and Example of Moody’s

Moody’s is a financial services company and the holding company for Moody’s Investor Service and Moody’s Analytics. In 1909, the company was founded by John Moody to produce manuals of statistics on stocks and bonds.

Note

In 1914, Moody’s Investor Service was established. It was acquired by credit reporting agency Dun & Bradstreet in 1962. Moody’s Corporation was formed and became a publicly traded company in 2000, listed on the New York Stock Exchange (NYSE) under the ticker MCO.

In 2008, Moody’s Analytics was founded. The parent company continues to acquire new investments and expand its global footprint into areas such as real estate and cyber security.

Moody’s operates in more than 40 countries and has more than 13,000 employees.

How Does Moody’s Work?

Moody’s Corporation is a financial services company and the parent company of Moody’s Investor Service and Moody’s Analytics. The company operated as Moody’s Investors Service until 2008, when it formed Moody’s Analytics.

Note

The main difference between the two companies is that Moody’s Investors Service focuses on credit ratings, and Moody’s Analytics focuses on non-credit rating activities.

Let’s look at each company in more depth below.

Moody’s Investors Service

Moody’s Investors Service is a credit rating firm that employs more than 1,500 analysts to rate debt securities across a wide range of markets. Moody’s has rated more than $73 trillion in debt, including government and corporate bonds, fixed-income funds, and financial institutions.

Moody’s Analytics

Moody’s Analytics was established in 2008 to focus on non-credit rating activities such as economic research. The company offers software and tools to help companies understand and implement risk management. Moody’s Analytics also provides consulting and professional training for financial companies.

Note

Moody’s is one of three leading companies that evaluate the creditworthiness of bonds. Fitch and Standard & Poor’s (S&P) are the others. These companies determine the bond’s rating, which affects the yield companies offer investors. In general, the lower the credit rating, the higher the yield.

Types of Bond Ratings

Moody’s Investors Service provides credit ratings that inform investors on the probability of default and how severe those potential losses could be. The credit ratings are comparative, meaning they rank borrowers based on the likelihood of default and loss so investors can make broader comparisons. They do not indicate risk in absolute terms.

These ratings are publicly available and cover a wide range of markets, industries, and geographies. The following table provides an overview of Moody’s bond ratings and what each one means.

Rating Grade Risk
Aaa Investment Grade Low risk
Aa Investment Grade Low risk
A Investment Grade Low risk
Baa Investment Grade Moderate risk
Ba, B Non-Investment Grade High risk
Caa, Ca, C Non-Investment Grade High risk
C Non-Investment Grade In default

A credit rating assesses an organization’s creditworthiness and the likelihood of default, which provides a valuable ranking tool for analyzing an investment. As you can see from the table, Moody’s credit ratings are expressed as alphabetical grades.

Of course, there is a risk of loss at every rating, including investment-grade ratings. But in general, the risk of loss increases as you move down the rating scale.

Key Takeaways

  • Moody’s Corporation is a financial services company and the holding company for Moody’s Investors Service and Moody’s Analytics.
  • Moody’s Investors Service is a credit rating firm that provides investors with credit ratings for debt based on the likelihood of default and the potential severity of losses in the event of a default.
  • Moody’s Analytics focuses on non-credit rating activities by providing economic research, consulting, and tools that help with risk analysis.
  • Credit ratings are organized as alphabetical grades, and rank an organization’s ability to meet its financial obligations.
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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Moody’s Corp. “Moody's / Who We Are.”

  2. Moody’s Investors Service. “Moody's Corporation.”

  3. Moody's. "About Us."

  4. Moody’s. “Moody's Investors Service.”

  5. Moody’s Analytics. “About Moody's Analytics.”

  6. Fidelity. “Bond Ratings.”

  7. Moody’s Investors Service. “Understanding Moody’s Credit Rating.”

  8. Moody’s. “Moody’s Rating Scale and Definitions.”

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