Credit rating is a quantifying of a government, or company's creditworthiness. This is meant to provide an assessment as to whether the debt can be repaid.
It helps lenders to reduce the credit risk of a perspective debtor.
Individual credit scores are calculated by credit reporting agencies such as Experian, Equifax, and TransUnion. Credit ratings for companies and governments are calculated by a credit rating agency such as S&P Global, Moody’s, or Fitch Ratings.
A loan is a debt which is a promise to pay the money back, most often with interest. Credit rating determines the likelihood that payment will be made and the avoiding of default by the borrower.
The higher an entity's credit rating indicates better odds of repayment. Hence, it is considered less risk.
