Junk Status

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edmundo

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What does junk Status Mean ?

I assume it is a negative ( or very negative) assesment of your ability to repay loans ?
 
It's not a negative assessment in the sense that the overall assessment is that you probably won't repay. But it's a (relatively) poor assessment of your ability to meet your financial obligations, and it leads to you having to pay higher interest rates, because lenders think you present a materially higher risk of default
 
When you both say "you" and "your" do you mean that somebody (credit rating agency) can assign "junk status" to an individual? I thought that this sort of thing only applied to corporations and specifically corporate bonds?
 
Thanks for the answer , i was wondering how it affected a company.
 
Junk Bond Status - Moody's , S & P official definitions

Junk Bond includes any issuer with a credit rating of 'BB' or lower from the Standard & Poor Agency, or 'Ba' or lower from Moody's Agency.
S & P sees BB as follows - An issuer rated 'BB' has marginal financial security characteristics. Positive attributes exist, but adverse business conditions could lead to insufficient ability to meet financial commitments.

Moody's sees Ba as follows - Counterparties rated Ba offer questionable financial security. Often the ability of these entities to meet counterparty obligations may be uncertain and thereby not well safeguarded in the future.
 
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