This is part of an ongoing Finance 101 series that goes back to the basics to help public officials.
Much like personal credit scores, the interest rate local and state governments pay when they borrow money is tied to their credit worthiness. The rating tells investors about the likelihood of getting their money back -- with interest -- on that government’s bond. The higher the rating, the less risky the investment. And vice versa.
This explainer breaks down the role a government’s credit rating plays in its everyday finances.