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What does it mean when a country’s credit rating is being downgraded by rating agencies?

07 Feb 2010

7 Feb, 2010  rating

What is this whole rating thing all about? Why do countries have ratings? And what is the purpose of it?

Ratings is how credit worthy a organization is. In this case a country, but it is also used for corporations. It is similar to your credit score.

The reason a country, or an organization has a credit rating is to give investors, or loaners an idea of how capable the organization is to pay back the debt.

If the US gets downgraded to a Bbb credit rating it is basically like saying that their is a greater risk that the US can no longer pay its debt. It is like your credit score going down.

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5 Responses

  1. meg

    2010 Feb 07 1

    Government default on their debts just like homeowners and companies. It means their bonds are considered to be risky so they will have to pay a higher interest rate to borrow.
    References :

  2. Eddy T

    2010 Feb 07 2

    A country that has a high credit rating by rating agencies means that it can borrow and pay its interest payments promptly and the loan repayment on maturity.
    References :

  3. joe1max

    2010 Feb 07 3

    Ratings is how credit worthy a organization is. In this case a country, but it is also used for corporations. It is similar to your credit score.

    The reason a country, or an organization has a credit rating is to give investors, or loaners an idea of how capable the organization is to pay back the debt.

    If the US gets downgraded to a Bbb credit rating it is basically like saying that their is a greater risk that the US can no longer pay its debt. It is like your credit score going down.
    References :

  4. Dr. House

    2010 Feb 07 4

    See 3d answer. Let me add this: and therefore that their debt in the secondary markets looses value.For example: Mexico’s debt: 0.65 c to the dollar. Peru: 0.25c to the dollar. Haiti: 0.05 c to the dollar or the price of recycling paper whatever is cheaper.
    References :

  5. SDD

    2010 Feb 07 5

    The purpose of it is to estimate risk premium. It’s the same reason you might charge higher interest on a loan to someone who has a tenuous job than someone who can’t be fired.
    References :


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