WATCH: How do rating agencies determine credit ratings?
TMG Digital | 2017-06-09 16:46:10.0
Ratings agencies have a lot of power in the world, as a negative rating can make it harder for entire countries to borrow money.
Think about it the way you do when you borrow money to buy a car – if you have a bad credit rating you’re not going to get a loan at FNB, you’re going to a loan shark who wants 50% interest and has people who will break your legs if you don’t pay.
South Africa’s credit has been rated as junk by two of the major ratings firms, meaning our ability to borrow money in order to help rebuild after disasters like the Knysna fires or to invest in improvements to our infrastructure is that much more restrictred.
So how do these ratings agencies come up with these ratings?
Hillary Joffe, editor at large, explains.