Credit ratings are essential for assessing the risk of lending to an individual, corporation, or country. They provide investors with a standardized measure of the likelihood that a borrower will default on their debt obligations. Credit ratings play a vital role in determining the interest rate that borrowers must pay on loans or bonds, with higher ratings typically leading to lower borrowing costs. Lenders and investors use credit ratings to assess whether a borrower is capable of repaying debt, helping them make informed investment or lending decisions.