Fitch Ratings Scale: AAA to D, Notches, and Outlooks

The Fitch ratings scale runs from AAA at the top to D at the bottom, sorting borrowers by how likely they are to default on their debt. Everything from AAA through BBB- is investment grade, meaning default risk is considered low. Everything from BB+ through D is speculative grade, often called “high yield” or “junk.” That dividing line between BBB- and BB+ is the most consequential threshold on the scale, because many pension funds, insurance companies, and other institutional investors are barred by their own mandates from holding anything below it.¹

Fitch is one of the three dominant credit rating agencies worldwide, alongside S&P Global Ratings and Moody’s Investors Service, and is registered with the SEC as a Nationally Recognized Statistical Rating Organization.² Its main output is the Long-Term Issuer Default Rating, which gauges how vulnerable a company, bank, or government is to default over a multi-year horizon.

Investment Grade: AAA to BBB-

Investment grade ratings signal that a borrower has a solid enough financial profile to make default unlikely under normal and even moderately stressed conditions.³

AAA is the highest rating Fitch assigns. Default risk is about as low as it gets, and the issuer’s ability to pay is unlikely to be shaken by any foreseeable event. Very few entities carry this rating at any given time, and losing it is headline news.

AA still carries very low default risk. The issuer’s financial strength is formidable, though not quite as bulletproof as an AAA borrower. Most highly rated sovereign nations and top-tier banks land here.

A means a strong borrower with low expected default risk, but one whose finances are more exposed to adverse business or economic shifts than an AA-rated peer.

BBB means default risk is currently low and the ability to pay is adequate, but a serious downturn in the issuer’s industry or the broader economy is more likely to impair that ability than it would for higher-rated borrowers. The jump from A to BBB matters more than it might look: A-rated issuers have strong capacity to pay, while BBB-rated issuers have only adequate capacity. That single-word difference reflects a meaningful drop in resilience.

Speculative Grade: BB+ Through C

Once you cross below BBB-, default risk rises meaningfully. Investors demand higher yields on this debt to compensate, which is why the speculative tier is commonly called “high yield.”³

BB means default risk is elevated, especially if business or economic conditions worsen. The issuer still has enough financial flexibility to keep servicing debt for now, but that cushion is thinner than anything in investment grade.

B means material default risk is present with only a limited margin of safety. The issuer is currently paying its obligations, but its ability to keep doing so is vulnerable to any real deterioration in conditions.

CCC means substantial credit risk. Default is a real possibility, and the safety margin is very thin.

CC means default of some kind appears probable.

C means a default or default-like process has already begun, or the issuer’s ability to pay has been irrevocably impaired.

Default: D and RD

At the bottom of the scale sit two designations for issuers that have already failed to pay. D means the issuer has entered bankruptcy, receivership, liquidation, or a similar formal wind-down process, or has otherwise ceased operating while debt remains outstanding.³

RD, or Restricted Default, means the issuer has missed a payment or completed a distressed debt exchange on a specific obligation, but has not entered formal bankruptcy proceedings and is still operating. A company can default on one bond while continuing to service others, and the RD label captures that reality. For bondholders it matters, because an RD issuer is still a going concern and may restructure successfully, so recovery prospects can be meaningfully different than if the company had shut down entirely.

Plus and Minus Notches

Within each major letter category from AA down to CCC, Fitch adds a “+” or “-” suffix to show where the issuer sits relative to the midpoint of that category. An A+ rating is near the top of the A range; an A- rating is near the bottom. These suffixes are sometimes called “notches,” and each step can affect an issuer’s borrowing costs and eligibility for inclusion in certain bond indexes.¹

Notches are not applied to AAA (nothing is higher than the highest), or to CC, C, D, and RD, which Fitch treats as definitive endpoints rather than ranges. BBB- deserves particular attention: it is the lowest investment-grade notch, so one downgrade step pushes the issuer into speculative territory. That single step can trigger forced selling across entire portfolios and drive borrowing costs sharply higher.

The Short-Term Scale

Fitch maintains a separate scale for obligations with maturities of roughly twelve months or less, such as commercial paper and short-term bank deposits. Where the long-term scale is about solvency over years, the short-term scale is about liquidity right now.¹

F1 is the strongest capacity for timely payment. When liquidity is especially robust, Fitch adds a “+” to create F1+, which sits at the very top of the short-term scale.
F2 is good capacity for timely payment, though the margin of safety is not as wide as F1.
F3 is adequate capacity for timely payment, but more sensitive to adverse short-term changes.
B is uncertain capacity for timely payment. This is the short-term equivalent of speculative grade.
C is highly uncertain capacity; the issuer is under significant liquidity stress.
D means the issuer has defaulted on a short-term obligation.

Short-term and long-term ratings don’t always move in lockstep. A company with shaky long-term fundamentals can still have strong near-term liquidity if it recently raised cash, and vice versa. That said, a low long-term rating usually drags the short-term rating down eventually.

Outlooks and Rating Watch

A rating on its own tells you where an issuer stands today. Two additional signals tell you which way it might move.

Rating Outlooks

A Rating Outlook is Fitch’s view on the likely direction of a rating over the next one to two years. It reflects trends that haven’t yet triggered a rating change but could if they continue.¹ A Positive Outlook means the rating could be raised if current trends continue. A Negative Outlook means it could be lowered. A Stable Outlook, the most common designation, means the rating is expected to stay where it is.

A Positive or Negative Outlook does not guarantee a rating change will follow. An issuer with a Stable Outlook can still be upgraded or downgraded if circumstances shift suddenly. In unusual situations where both positive and negative forces are pulling hard in opposite directions, Fitch may assign an Evolving Outlook.

Rating Watch

Rating Watch is a shorter-term signal, used when an event has occurred or is expected that could change a rating relatively soon. Where Outlooks look one to two years out, a Rating Watch typically resolves within six months. Fitch places issuers on Rating Watch Positive, Negative, or Evolving depending on the expected direction of the change. Common triggers include announced mergers, regulatory actions, or sudden financial deterioration.

Other Designations You’ll See

Some ratings carry suffixes or labels that change how you read them. Structured finance ratings use the standard letter scale with an “sf” suffix appended: AAAsf, BBBsf, and so on. The suffix flags that the rating is based on the cash flows from a pool of underlying assets and the legal structure of the transaction, not on the financial health of any single company.¹ A mortgage-backed security can be rated AAAsf even if the bank assembling it is rated only A, because the legal structure isolates the asset pool from the bank’s own credit risk.

National scale ratings rank issuers only against others in the same country, using the standard letter grades followed by the country’s ISO code in parentheses, such as AAA(bra) for Brazil or AA+(tur) for Turkey.³ A national AAA does not mean the same thing as a global AAA. A company rated AAA(bra) is simply the lowest default risk relative to other Brazilian issuers; on the global scale that same company might rate much lower because it carries the sovereign risk of its home country.

WD means the rating has been withdrawn and the issuer is no longer rated by Fitch. This can happen because the issuer was taken private and stopped providing financial information, the rated debt was fully repaid, or Fitch decided to discontinue coverage. A withdrawn rating is not a downgrade.⁴ NR means Not Rated, used when Fitch has rated some but not all securities in an issuer’s capital structure.

How Fitch Compares to S&P and Moody’s

Fitch and S&P use nearly identical letter systems. Moody’s uses a different naming convention, but the tiers map cleanly across all three:

Highest quality: Fitch AAA = S&P AAA = Moody’s Aaa
Very high quality: Fitch AA = S&P AA = Moody’s Aa
Upper medium quality: Fitch A = S&P A = Moody’s A
Lowest investment grade: Fitch BBB = S&P BBB = Moody’s Baa
Speculative: Fitch BB = S&P BB = Moody’s Ba
Highly speculative: Fitch B = S&P B = Moody’s B
Substantial risk: Fitch CCC = S&P CCC = Moody’s Caa
Default: Fitch D = S&P D = Moody’s C

The notch system differs slightly. Fitch and S&P use “+” and “-” (AA+, AA-), while Moody’s uses numbers: Aa1, Aa2, Aa3. An Aa1 from Moody’s is the same level of credit quality as an AA+ from Fitch. Fitch uniquely offers the RD designation for selective defaults, whereas S&P uses “SD” for the same concept.

The three agencies sometimes disagree on the same issuer. When they do, it’s called a “split rating,” and bond investors typically look at all available opinions rather than relying on just one. Many investment mandates and regulatory frameworks reference ratings from at least two of the three agencies, so any credit rating is best treated as one input among many rather than a guarantee of creditworthiness.

1
Fitch Ratings. Rating Definitions
2
U.S. Securities and Exchange Commission. Current NRSROs
3
Fitch Ratings. Ratings Definitions
4
Fitch Ratings. Fitch Withdraws Dun and Bradstreet Ratings