Think of a bond rating as a school report card. Companies have ranking for bonds based on the likelihood of the bond defaulting on its invested amount
Now that we’ve tackled bond premiums, it’s time you learn about bond ratings and why they are so important to understand.
What is a bond rating?
Think of a bond rating like a report card for the bond market. Schools give letter grades to students. They are based on the likelihood of the bond defaulting on its invested amount. Investment companies generally require bond issuers to have at least two ratings from those and other rating companies.
The rating companies examine and weigh the investment risk of a bond. The ratings can be thought of as risk assessments and are judgments on the credit strength of the companies and their risk for defaulting — not paying — on their debt obligations.
Investors can look at the rating for a particular bond and see if the investment would be low risk — bonds with a higher rating, or higher risk — bonds that have lower ratings.
The ratings systems are based on a letter grading system, A through D, with the AAA being the highest level a bond issuer can achieve.
The S&P’s bond ranking uses the following ratings, so let’s use this as an example:
AAA and AA Bond Rating
If a bond has these ratings, the investor can be assured that it is a high credit-quality investment grade.
<h2″>AA and BBB Bond Rating
While not as secure as the higher levels, bonds with these ratings are considered medium credit-quality investment grade.
BB, B, CCC, CC and C Bond Rating
Bonds with these ratings are low quality grade bonds, also known as junk bonds or non-investment grade bonds.
D Bond Rating
Bonds that have this rating are already in default for non-payment of principal and/or interest.
Impact of Bond Ratings
Financial analysts say the rating of a bond affects a company’s ability to secure lucrative interest rates for its debt and the amount of funds a company can go after — which could impact bond price.
In general, a bond with a higher chance of default — with the investor being out of money — would be lower priced than a secure AAA investment with a low chance of default.
Other financial experts point out that these ratings are mere opinion and not an accurate judge of a bond’s worth or the company’s ability to pay back its investors.
Bond Rating Agencies
Every 6-12 months, rating agencies review bond ratings. A bond may be reviewed at any time the agency deems necessary, though. Reasons for this are missed or delayed payments to investors, issuance of new bonds, changes to an issuer’s underlying financial fundamentals, or other broad economic developments.
Institutional and individual investors rely on bond rating agencies and their in-depth research to make investment decisions. Rating agencies play an important role in the investment process and can make or break a company’s success.
Bond Rating Tips
While the rating agencies provide a robust service and are worth the fees they earn, the value of such ratings has been widely questioned since the 2008 financial crisis, and the agencies’ timing and opinions have been criticized when dramatic downgrades have come very quickly.
Investors should not rely solely on the bond rating agency’s rating and should supplement the ratings with their own research. It’s also important to frequently review the ratings over the life of a bond.
Curious about bonds and their ratings? Check out this course on Investing In Different Markets.
Ranking of Top Stock Newsletters Based on Last 3 Years of Stock Picks as of August 16, 2025
We are paid subscribers to dozens of stock and option newsletters. We actively track every recommendation from all of these services, calculate performance, and share our results of the top performing stock newsletters whose subscriptions fees are under $500. The main metric to look for is "Return vs SP500" which is their return above that of the S&P500. So, based on August 16, 2025 prices:
Best Stock Newsletters
| Rank | Stock Newsletter | Picks Return | Return vs SP500 | Picks w Profit | Max % Return | Current Promotion |
|---|---|---|---|---|---|---|
| 1. |  Alpha Picks | 74.7% | 51.1% | 78% | 969% | August, 2025 Promotion: Save $50 |
| Summary: 2 picks/month based on Seeking Alpha's Quant Rating; Retail Price is $499/yr. See complete details and analysis in our Alpha Picks Review. | ||||||
| 2. |  Moby.co | 52.5% | 18.1% | 73% | 2,406% | August, 2025 Promotion:Next pick free! |
| Summary: 60-150 stock picks per year, segmented by industry; Retail Price is $199/yr. Read our Moby Review. | ||||||
| 3. |  Zacks Top 10 | 33.0% | 15.1% | 73% | 170% | August, 2025 Promotion:$1, then $495/yr |
| Summary: 10-25 stock picks per year based on Zacks' Quant Rating; Retail Price is $495/yr. Read our Zacks Review. | ||||||
| 4. |  TipRanks SmartInvestor | 18.6% | 7.6% | 65% | 386% | Current Promotion: Save $180 |
| Summary: About 1 pick/week focusing on short term trades; Lifetime average return of 355% vs S&P500's 149% since 2015. Retail Price is $379/yr. Read our TipRanks Review. | ||||||
| 5. |  Stock Advisor | 41.7% | 6.1% | 76% | 299% | August, 2025 Promotion: Get $100 Off |
| Summary: 2 picks/month and 2 Best Buy Stocks lists focusing on high growth potential stocks over 5 years; Retail Price is $199/yr. Read our Motley Fool Review. | ||||||
| 6. |  Action Alerts Plus | 25.9% | 4.9% | 65% | 210% | Current Promotion: None |
| Summary: 100-150 trades per year, lots of buying and selling and short-term trades. Read our Jim Cramer Review. | ||||||
| 7. | Rule Breakers | 35.6% | 1.2% | 78% | 273% | Current Promotion: Save $200 |
| Summary: 2 picks/month focusing on disruptive technology and business models; Lifetime average return of 355% vs S&P500's 149% since 2005; Now part of Motley Fool Epic. Read our Motley Fool Epic Review. | ||||||
| 8. | Zacks Home Run Investor | 3.5% | -1.3% | 44% | 200% | August, 2025 Promotion:$1, then $495/yr |
| Summary: 40-50 stock picks per year based on Zacks' Quant Rating; Retail Price is $495/yr. Read our Zacks Review. | ||||||
| 9. | IBD Leaderboard ETF | 11.4% | -1.8% | n/a | n/a | August, 2025 Promotion:Save $129/yr |
| Summary: Maintains top 50 stocks to invest in based on IBD algorithm; Retail Price is $495/yr. Read our Investors Business Daily. | ||||||
| 10. | Stock Advisor Canada | 23.5% | -4.6% | 69% | 378% | August, 2025 Promotion: Save $100 |
| Summary: 1 pick/month from the Toronto stock exchange; Retail Price is CD$199/yr. Read our Motley Fool Canada Stock Advisor Review. | ||||||
| Top Ranking Stock Newsletters based on their 2024, 2023, 2022 stock picks' performance as compared to S&P500. S&P500's return is based on average return of S&P500 from date each stock pick is released. NOTE: To get these results you must buy equal dollar amounts of each pick on the date the stock pick is released. Investor Business Daily Top 50 based on performance of FFTY ETF. Performance as of August 16, 2025. | ||||||