Creditworthiness, as reflected in bond ratings, is of great interest to municipalities since it directly affects the cost and ability to borrow money. Municipalities experiencing fiscal or financial stress are especially concerned about how these developments will impact their future bond ratings. It is well known that municipal analysts monitor a community’s economic health since this has an important impact on creditworthiness. What is less well known however, are the underlying factors that influence the bond rating process. As a dominant force in the municipal credit rating market, Moody’s Investors Service has been criticized for employing a process that lacks transparency, is not easily understood by professionals or the general public and yields lower ratings, and therefore higher borrowing costs for instruments with less risk of default than corporate bond equivalents. The purpose of this paper is to develop an econometric model of the rating process that identifies the economic, demographic, fiscal, governmental and financial factors that influence the perception of the probability of a municipality’s default. The model will allow municipal governments to gauge the impact of an observable set of factors on their credit ratings. It will also provide some basis for anticipating changes in bond ratings that can affect the prices of bonds held in a variety of portfolios.