A rating agency is an organization that evaluates the creditworthiness of governments and corporations, assigning ratings that indicate the likelihood of debt being repaid. Major agencies include Moody's, Standard & Poor's (S&P), DBRS Morningstar, and Fitch. When municipalities issue bonds or debentures, rating agencies assess their financial health, debt levels, economic conditions, and governance quality. Higher ratings (like AAA or AA) mean lower borrowing costs because investors see less risk. Rating downgrades can increase interest costs and signal financial concerns. Municipalities monitor their credit ratings and make decisions with rating implications in mind, as ratings affect borrowing capacity and costs.