Why do credit score ratings play such an essential role in our everyday lives? Credit ratings are essential because they indicate how likely an individual, a business, a city, a county, a state, or even a country is able to repay a debt. Each one of these entities has a credit rating and depending on positive or negative factors, a rating can be upgraded or downgraded.
For example, the U.S. had always maintained a top tier AAA credit rating. But recently, one of the major credit-rating agencies, Standard & Poor, downgraded our country’s credit rating for the first time.
As a result, America’s cost of borrowing increased by billions of dollars per year, which inevitably impacts consumers through higher interest rates and borrowing costs.