Each year, RapidRatings analyzes public and private company defaults through the lens of the Financial Health Rating (FHR), a 0–100 score that predicts financial stability and provides early warning signs of deterioration and company failure.
This article summarizes key findings from the 2026 Annual Default Review and explains how the FHR continues to deliver highly accurate, early default predictions across U.S. non‑financial companies.
What the Annual Default Review Shows
The 2026 Annual Default Review examines the 40 U.S. non‑financial companies that defaulted in 2025 and compares them to broader trends observed from 226 defaults between 2021 and 2025.
Over this period, 92% of defaulters filed for bankruptcy while rated High or Very High Risk (FHR below 40).
Default Frequencies at Each FHR (2021–2025)
These results demonstrate that:
Companies with lower FHRs are far more likely to default than those with higher FHRs.
Companies rated Low Risk (60–79) or Very Low Risk (80–100) almost never default. While negative shocks can occur, firms with strong financial fundamentals have the resilience to withstand them.
A High Risk or Very High Risk rating indicates that the company’s financial profile resembles that of historical defaulters far more than survivors.
Low‑risk firms remain exceptionally unlikely to face a failure event that they cannot survive.
Results from 2025
The following is a summary of the risk profiles exhibited by the 40 defaulters from 2025 at the time of, and approaching, default:
88% of defaulters filed for bankruptcy while rated High or Very High Risk (FHR below 40).
The average FHR at default was 27.
12 months prior: 30
36 months prior: 40
50% of firms defaulted with an FHR below 25.
90% defaulted with an FHR below 43.
100% of companies that filed for bankruptcy in 2025 had been flagged with concerns in their Financial Dialogue going into 2025.
Why This Matters
The 2025 results reinforce several key principles:
The FHR provides clear, early warning signals, often more than a year before default.
Companies that default show a predictable pattern of financial decline, reflected in steadily falling FHRs.
High‑risk ratings continue to identify the vast majority of future defaulters, while keeping false‑alarm rates low for healthy firms.
The trends from 2025 further validate the FHR as a highly reliable predictor of corporate failure, giving our clients the insight and lead time needed to make confident, strategic risk decisions.
Our most recent Annual Default Review presents a detailed analysis of defaults over the last 5 years, including all defaulters from the prior calendar year. Please reach out to support@rapidratings.com if you're interested in this level of detail.