Fitch just downgraded the US credit rating - how important is that?

In the financial world, its similar to the gold standard: AAA, the three letters that mean the safest investment.

For decades, the United States has proudly maintained a top-notch debt rating, reflecting its status as the worlds largest and safest economy, and has never defaulted on its debt.

But on Tuesday, Fitch Ratings downgraded U.S. debt by one notch, from AAA to AA+, partly in response to how the federal government handled the debt crisis two months ago. The move mirrors a similar downgrade by S&P in 2011, also after a deadlock over the debt ceiling in Congress.

Fitch has expressed concern over the countrys deteriorating fiscal position and has serious doubts about the governments ability to address its growing debt burden amid deep political divisions and brinkmanship over the debt ceiling that has brought the government to the brink of a catastrophic default.

Treasury Secretary Janet Yellen scathed Fitch for the decision, sending the Dow Jones Industrial Average down more than 300 points.

Its hardly a market crash, but that doesnt mean the downgrade doesnt matter.

How reliable are they?

This is where things get dangerous. While ratings are still an important part of the financial system, the agencies that issue them have come under a lot of criticism.

During the 2008 global financial crisis, many bankrupt subprime mortgage bonds were rated highly by rating agencies, exposing the flaws in the system.

In the aftermath of the crisis, regulation of credit institutions was tightened, but the debt rating system remained largely unchanged.

The main thing to know is that credit ratings are subjective. They are an agency assessment - opinions may vary.

So what would happen if America lost its AAA rating?

When this first happened in 2011, the U.S. reacted badly.

Markets tumbled (though eventually recovered), President Obama addressed the downgrade in a news conference, and then-Treasury Secretary Tim Geithner angrily denounced S&Ps decision as flawed

This time, the situation is similar, but the response so far has been calmer.

A key reason is that the reasons Fitch points to - the "deteriorating" states finances, mounting debt burdens and "erosion of governance" - are now well understood.

Top investment bank Goldman Sachs was blunt on Wednesday: "The downgrade does not incorporate new fiscal information", adding that Fitchs forecast was similar to its own.

The countrys sharp political divisions have been evident for years without having any meaningful impact on markets.

Most importantly, the dollar remains the worlds number one reserve currency. Investors around the world, from other top central banks to pension funds, hold trillions of dollars in U.S. government debt, and thats unlikely to change just because of the Fitch downgrade. The U.S. dollar is still considered a safe-haven currency.

"The downgrade should have little immediate impact on financial markets, as major holders of U.S. Treasuries are unlikely to be forced to sell as a result of the rating change," Goldman Sachs said.