News - Blog

Government credit ratings – What do they mean to us?

Christine Kuglin  |  August 10, 2022

We are taught to monitor our credit scores from Equifax, Experian, and TransUnion. These scores reflect how creditors and even employers view our financial reputation. 

Governments rely on credit ratings, too. For example, agencies assign our government's credit scores so that if consumers want to invest in government-issued bonds, we understand the government's ability to return our initial investment and pay any interest due.

A credit rating from Standard and Poor's tells us the government's creditworthiness. It does not tell us how much debt the government is carrying, the current state of its tax collections, or the quality of its fiscal managers. The ratings don't tell us anything about interest rates or tax considerations. It merely reflects the government's ability to pay back bondholders.

Employers review our job history, education, references, and credit check to ensure we are someone they can trust. So why should we rely only on credit ratings to assess the financial health of our government? After all, credit ratings are only one tool for taxpayers to evaluate the government's trustworthiness. We need to rely on more than a credit rating to assess how efficiently and effectively our government operates.


comments powered by Disqus