What does credit rating mean?

Classroom

oi-Monika Nihalani

By Monika Nihalani

Published: Tuesday, August 9, 2011, 13:03 [IST]

Top rating or high credit rating allow countries to borrow debt or cash at cheap interest rates, where in lower credit ratings result in higher borrowing costs because the borrower is deemed to carry a higher risk of default.

A recent downgrade for America would mean US bond investors would want to get paid more to compensate for the risk of holding government debt.

Anything that slips to junk status — as Ireland, Portugal and Greek government bonds are rated — is considered a “highly speculative" investment.

Standard & Poor's, Moody's and Fitch Ratings designate alphabets to denote strength and weakness of the country's financial position.

Check out, what do S&P's alphabetic ratings mean?