Credit Ratings Explained : Why Is It Important For A Country? [ Animated ] | ThingsToKnow

What is Credit Rating?

A credit rating is an assessment of the creditworthiness of a borrower. Individuals, corporations and governments are assigned credit ratings — whoever wants to borrow money.

What about the Credit Score?

Individuals who want to borrow money are given ‘credit scores’, while corporations and governments receive ‘credit ratings’.

Why are the Credit Ratings so important?

National governments, not countries, are assigned credit ratings by agencies like Standard & Poor’s, Moody’s and Fitch. Governments require ratings to borrow money.

A country requests a credit rating agency to evaluate its economic and political environment and arrive at a rating. This is done to position itself as a destination for foreign direct investment.

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