How do they rate countries?

<ul id="pagination-digg"><li class="next"><a href="/classroom/2011/08/role-credit-rating-agencies-what-credit-rating-mean-09.html">Next »</a></li><li class="previous"><a href="/classroom/2011/08/role-credit-rating-agencies.html">« Previous</a></li></ul>

The concept is as same as with credit cards. Before you can get a credit card, banks run a credit check on you. Similarly, the ratings agencies run credit checks on companies, countries and financial products.

They track and monitor performance of economy or countries as well as their default statistics and provide ratings on the basis of their history of borrowing and repayment.

They rate on the basis of country's borrowing and repaying capability considering other macroeconomic indicators. If country is under debt for a prolonged time and not able to manage its high debt situation, rating agencies may downgrade their credit rating.

For example, Standard & Poor (S&P), one of the 'Big Three' credit rating agencies downgraded U.S.' credit rating from AAA to AA+, on concerns about the government's budget and rising debt burden.

<ul id="pagination-digg"><li class="next"><a href="/classroom/2011/08/role-credit-rating-agencies-what-credit-rating-mean-09.html">Next »</a></li><li class="previous"><a href="/classroom/2011/08/role-credit-rating-agencies.html">« Previous</a></li></ul>