What is an AA credit rating?

One of the higher credit ratings a prospective borrower can be given by ratings agencies S&P or Fitch. Moody's refer to it as an Aa2 rating. It suggests a company or government is unlikely to default on its debt repayments. It's applied to the bonds issued by a company or government.

Key takeaways

AA is one of the higher credit ratings from agencies like S&P and Fitch, indicating unlikely default on debt repayments.
Credit ratings directly impact borrowing ability, with high ratings like AA making it straightforward to find willing investors to lend.
Although ranked below AAA and AA+, AA-rated bonds don't need to offer particularly high yields due to investor security reassurance.
Ratings can be upgraded from AA- or downgraded from AA+, often occurring during economic turbulence or periods of strong performance.
Low credit ratings force borrowers to offer higher returns as they're viewed as riskier prospects compared to AA-rated entities.

Where have you heard about AA credit ratings?

During times of economic turbulence, you might hear about a country or business being downgraded to an AA rating from AA+. Alternatively, if they've performed well, they may be upgraded from AA- status.

What you need to know about AA credit ratings.

The credit rating given to a company or government can impact on its ability to borrow money. High credit ratings, like AA, mean it should be fairly straightforward to find investors willing to lend cash. On the other hand, a low credit rating means it's seen as a riskier prospect, and it may have to offer investors higher returns.

Although it's below AAA and AA+ in the pecking order, an AA rating is still likely to benefit a company. Because they provide reassurance to investors that their money is largely secure, bonds with an AA rating don't have to offer particularly high yields.

Find out more about AA credit ratings.

AA is at the higher end of the credit ratings chart. For more information on what determines these scores, see credit risk.