Credit scores affect financial the financial habits of every individual, but have you ever considered what an entire nation's credit score might look like?
You probably know that mortgage, auto and personal lenders today rely on your three-digit credit score to determine if they’ll loan you money and what interest rates they’ll charge you on this money. In general, credit scores under 620 are considered poor while those above 750 are considered excellent. It’s this last batch of credit scores that will nab you the lowest interest rates on money that you borrow.
But what if entire nations had their own credit scores? This isn’t implausible. Nations do borrow money. They do pay bills. They do run up debt. They do, then, have all the financial indicators that form the basis for credit scores.
If nations did have credit scores, how would the United States fare compared to the rest of the world? Perhaps not surprisingly, it wouldn’t fare too well. The United States is comparable to the classic big spender: The country has far too much debt to be considered a good credit risk.
Several countries, though, would rank in the “good” range of credit scores. Their financial activities would qualify them for solid credit scores in the 660 to 749 range. These include the country that would probably have the best credit score, China. China has $347 billion in debt and an account balance of $297 billion. It also has an excellent history of making its payments on time. This gives it the top credit score ranking among countries.
Following close behind are Australia, with its $920 billion worth of debt, account balance of negative $29 billion and its own excellent history of making payments on time; and Egypt, which ranks high with a small debt level of $28 billion, an account balance of negative $4 billion and a recent history of paying its debts on time. The country, though, does have a blemish; it nearly went insolvent in the 1800s.
Brazil is the last country to fit into the “good” range of credit scores. It has a debt of $216 billion, an account balance of negative $24 billion and a good payment history.
Falling into the next category of credit scores, the “fair” range, are countries such as India ($223 billion in debt, account balance of negative $31 billion and a good, but shorter credit history), France ($4 trillion in debt, account balance of negative-$56 billion and good recent history despite going bankrupt several times in the 1800s) and South Africa ($73 billion worth of debt, an account balance of negative $11 billion and a shorter credit history than other countries).
Also in the “fair” category are Italy, with $2.3 trillion of debt, an account balance of negative $66 billion and a good payment history; Japan, $2.1 trillion in debt, account balance of $140 billion and a good but shorter credit history; Germany, $5 trillion in debt, $135 billion in its accounts and a history that includes bankruptcies in 1920 and 1945; and the United Kingdom, $9 trillion in debt, an account balance of negative $32 billion and a bankruptcy after World War II.
In the “poor” category, for credit scores ranging from 350 to 619, comes the United States with $13 trillion in debt, an account balance of negative-$420 billion and an excellent history of making payments on time.
Countries that would have lower credit scores than the United States include Argentina, which went bankrupt in 2001; Russia, with its extremely rocky history and a bankruptcy in 1998; and Haiti, which has long been plagued by financial troubles.