The beta distribution is most appropriate and widely used in credit risk to model loss rates (such as Loss Given Default, LGD) and recovery rates because its domain naturally falls within the [0, 1] interval. This flexibly captures the behavior of rates and proportions. A normal distribution may occasionally be used to model rates if the expected value is far enough from the boundaries. Conversely, distributions like binomial and Poisson are discrete (typically for frequencies), while uniform, exponential, chi-squared, and gamma distributions generally do not fit the bounded, skewed properties of loss rates as effectively.