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A rating agency is a company that assesses the financial strength of companies and government entities, especially their ability to meet principal and interest payments on their debts. The rating assigned to a given debt shows an agency's level of confidence that the borrower will honor its debt obligations as agreed.How do rating agencies make money?
S&P, Fitch and Moody's make money by charging fees to the companies that desire a rating. They will also do unsolicited ratings and then send companies a bill. Often companies will pay since they are afraid that the rating might get dinged if they don't.How do rating agencies achieve rating stability?
In order to achieve rating stability, agencies take an undefined long-term perspective, which lowers the sensitivity of agency ratings to short-term fluctuations in credit quality.