Credit rating of countries, It is a measure of a country’s ability to repay its debt. These ratings help investors and other countries evaluate how much they can trust a country. Credit scores, which are very important in the global financial system and economic literature, are indicators that support the healthy functioning of markets and investors’ decisions. In our content, you can have detailed information about the credit rating systems that determine credit scores and what they mean.
What is Credit Score Rating?
Credit score rating is a scoring method that evaluates the current situation of individuals, companies or countries in terms of financial transactions and capital markets. While grading credit scores, the past and current financial or financial situations of the individuals, companies or countries evaluated are taken into account. Credit scores produced using scientific methods in the fields of mathematics, statistics, economics and business administration carry information about the future of the person, institution or country being evaluated. When considered in terms of credit scores of the countries that are the subject of our content, it is a set of applications in which the investment environment of that country is scored and its creditworthiness is revealed.
How to Determine Credit Score? How to Interpret Credit Scores?
A credit rating can be an assessment of a borrower’s credit history or an assessment of a potential borrower’s ability to repay their debt. When it comes to countries’ credit scores, they reveal the reputation of institutions or individuals in that country in the global debt market and investment environment.
Low credit scores mean that the country and its institutions and individuals have a high risk of not paying their debts (default). Global capital tends not to go to low credit scores. More importantly, since the risk of these countries is high, borrowing costs and risk premiums also increase. Giant investment funds, which are global players with a say in the capital and credit markets, make choices based on their credit scores when distributing their portfolios. In other words, a decrease in credit ratings may result in the withdrawal of capital from that country.
Although there is a negative view of the investment environment in countries with low credit scores, high returns may increase the attractiveness of these countries. Since economics is a science of balance, returns tend to increase as risk increases. As credit scores drop below the investment grade level, some capital groups may choose to invest in these countries, taking the risks into account.
Credit Ratings of Countries and Their Meaning
Although there is no standard representation for countries’ credit ratings, global credit rating agencies may adopt their own methodology and representation.
Commonly used long-term credit scores and their meanings are as follows:
| Credit Score | Meaning |
| AAA | highest degree |
| AA+ | High Grade |
| AA | |
| AA- | |
| A+ | Upper Middle Class |
| A. | |
| A- | |
| BBB+ | Lower Middle Class |
| BBB | |
| BBB- | |
| BB+ | Non-Investable, Speculative |
| B.B. | |
| BB- | |
| B+ | Highly Speculative |
| B. | |
| B- | |
| CCC+ | High Risk |
| CCC | |
| CCC- | close to bankruptcy |
| C.C. | |
| C. | |
| D | Bankruptcy |
