Table:
|  |  |  | INTERNAL CREDIT RISK RATING |  |
| --- | --- | --- | --- | --- |
| July 27, 2019 | 1 to 4 | 5 to 6 | 7 and Higher | Total |
| Lease receivables | $1,204 | $991 | $35 | $2,230 |
| Loan receivables | 3,367 | 1,920 | 151 | 5,438 |
| Financed service contracts | 1,413 | 939 | 17 | 2,369 |
| Total | $5,984 | $3,850 | $203 | $10,037 |
Paragraphs:
(b) Credit Quality of Financing Receivables
Gross receivables, excluding residual value, less unearned income categorized by our internal credit risk rating as of July 27, 2019 and July 28, 2018 are summarized as follows (in millions):
We determine the adequacy of our allowance for credit loss by assessing the risks and losses inherent in our financing receivables by portfolio segment. The portfolio segment is based on the types of financing offered by us to our customers, which consist of the following: lease receivables, loan receivables, and financed service contracts.
Our internal credit risk ratings of 1 through 4 correspond to investment-grade ratings, while credit risk ratings of 5 and 6 correspond to non-investment grade ratings. Credit risk ratings of 7 and higher correspond to substandard ratings.
Question:
How did the company determine the adequacy for their allowance for credit loss?