A credit rating evaluates the credit worthiness of a debtor, especially a business (company) or a government. It is an evaluation made by a credit rating agency of the debtor's ability to pay back the debt and the likelihood of default.
Credit ratings are determined by credit ratings agencies. The credit rating represents the credit rating agency's evaluation of qualitative and quantitative information for a company or government; including non-public information obtained by the credit rating agencies analysts.
Credit ratings are not based on mathematical formulas. Instead, credit rating agencies use their judgment and experience in determining what public and private information should be considered in giving a rating to a particular company or government. The credit rating is used by individuals and entities that purchase the bonds issued by companies and governments to determine the likelihood that the government will pay its bond obligations.
A poor credit rating indicates a credit rating agency's opinion that the company or government has a high risk of defaulting, based on the agency's analysis of the entity's history and analysis of long term economic prospects.
Sovereign credit ratings 
A sovereign credit rating is the credit rating of a sovereign entity, i.e., a national government. The sovereign credit rating indicates the risk level of the investing environment of a country and is used by investors looking to invest abroad. It takes political risk into accounts.
The table shows the ten least-risky countries for investment as of January 2013. Ratings are further broken down into components including political risk, economic risk. Euromoney's bi-annual country risk index monitors the political and economic stability of 185 sovereign countries. Results focus foremost on economics, specifically sovereign default risk and/or payment default risk for exporters (a.k.a. "trade credit" risk).
A. M. Best defines "country risk" as the risk that country-specific factors could adversely affect an insurer's ability to meet its financial obligations.
Short-term rating 
A short-term rating is a probability factor of an individual going into default within a year. This is in contrast to long-term rating which is evaluated over a long timeframe. In the past institutional investors preferred to consider long-term ratings. Nowadays, short-term ratings are commonly used.
First, the Basel II agreement requires banks to report their one-year rose if they applied internal-ratings-based approach for capital requirements. Second, many institutional investors can easily manage their credit/bond portfolios with derivatives on monthly or quarterly basis. Therefore, some rating agencies simply report short-term ratings.
Corporate credit ratings 
The credit rating of a corporation is a financial indicator to potential investors of debt securities such as bonds. Credit rating is usually of a financial instrument such as a bond, rather than the whole corporation. These are assigned by credit rating agencies such as A. M. Best, DBRS, Dun & Bradstreet, Standard & Poor's, Moody's or Fitch Ratings and have letter designations such as A, B, C. The Standard & Poor's rating scale is as follows, from excellent to poor: AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-, BB+, BB, BB-, B+, B, B-, CCC+, CCC, CCC-, CC, C, D. Anything lower than a BBB- rating is considered a speculative or junk bond. The Moody's rating system is similar in concept but the naming is a little different. It is as follows, from excellent to poor: Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3, Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca, C.
A. M. Best rates from excellent to poor in the following manner: A++, A+, A, A-, B++, B+, B, B-, C++, C+, C, C-, D, E, F, and S. The CTRISKS rating system is as follows: CT3A, CT2A, CT1A, CT3B, CT2B, CT1B, CT3C, CT2C and CT1C. All these CTRISKS grades are mapped to one-year probability of default.
|A1||A+||A-1||A+||F1||Upper medium grade|
|Baa1||BBB+||BBB+||Lower medium grade|
|Ba1||Not prime||BB+||B||BB+||B||Non-investment grade
|Caa3||CCC-||In default with little
prospect for recovery
Credit rating agencies 
Other agencies include A. M. Best (U.S.), Baycorp Advantage (Australia), Dun & Bradstreet, ICRA Limited (India), Egan-Jones Rating Company (U.S.), Global Credit Ratings Co. (South Africa), Levin and Goldstein (Zambia), Agusto & Co. (Nigeria), Japan Credit Rating Agency, Ltd. (Japan)., Muros Ratings (Russia alternative rating agency), Rapid Ratings International (U.S.), Credit Rating Information and Services Limited(Bangladesh) and Public Sector Credit Solutions (U.S.).
See also 
|Wikimedia Commons has media related to: Credit rating|
- List of countries by credit rating
- List of sovereign states by public debt
- Government budget by country
- List of countries by tax revenue as percentage of GDP
- "S&P | Ratings Sovereigns Ratings List | Americas". Standard & Poor's. Retrieved August 7, 2011.
- Reference for the United States: "United States of America Long-Term Rating Lowered To 'AA+' On Political Risks And Rising Debt Burden; Outlook Negative". Standard & Poor's. Retrieved August 5, 2011.
- Kronwald, Christian (2009). Credit Rating and the Impact on Capital Structure. Norderstedt, Germany: Druck und Bingdung. p. 3. ISBN 978-3-640-57549-7.
- "Country risk survey" previous ranking from previous quarter, Euromoney Country risk
- "Country Risk Full Results": Originally a bi-annual survey which monitors the political and economic stability of 185 sovereign countries, according to ratings agencies and market experts. The information is compiled from Risk analysts; poll of economic projections; on GNI; World Bank’s Global Development Finance data; Moody’s Investors Service, Standard & Poor’s and Fitch IBCA; OECD consensus groups (source: ECGD); the US Exim Bank and Atradius UK; heads of debt syndicate and loan syndications; Atradius, London Forfaiting, Mezra Forfaiting and WestLB.
- "Country risk survey". Euromoney.com.
- "Country Risk". ambest.com. Retrieved 2011-08-08.
- de Servigny, Arnaud and Olivier Renault (2004). The Standard & Poor's Guide to Measuring and Managing Credit Risk. McGraw-Hill. ISBN 978-0-07-141755-6.
- Oligario, Rowena. "Credit-Reporting Agencies: Their Historical Roots, Current Status, and Role in Market Development." University of Michigan Business School. www.bad-credit-loans.ca/2429_olegario.pdf
- "Credit Rating Agencies—NRSROs". U.S. Securities and Exchange Commission. 25 September 2008. Retrieved 2009-04-30.
- "List of Credit Rating Companies". Bangladesh Securities and Exchange Commission. 2 September 2008. Retrieved 2007-03-12.
- Crisl History
Media related to Credit rating at Wikimedia Commons