The job of the credit analyst is one that is very literally defined by financial responsibility. Credit analysis is the process of determining how worthy a loan applicant is to receive credit from a bank or other financial institutions. Credit analysts tend to specialize according to the type of applicants they assess; the major division in the profession is between assessing individual consumers or companies. (Find more information in our article “What Is A Corporate Credit Rating.)
Credit analysts usually work directly for an institution that lends money or extends credit, including banks (commercial and investment), credit card companies, credit rating agencies, and investment firms. If you’re curious about whether or not you have what it takes to step into this profession, just keep reading.
The Job Of The Credit Analyst
The credit analyst’s main responsibility is to gather financial data relating to a given applicant and then analyze it. Data involved include a client’s earnings, savings, credit history, purchase activity, and payment habits.
Credit analysts collect as much data as possible to build up an accurate picture of an applicant’s creditworthiness. After analyzing the information they’ve collected, analysts recommend a course of action to their customer. A credit analyst employed by a credit card company, for instance, might be tasked with collecting information regarding current customers of the company who have defaulted on past credit card payments. By reviewing customers’ behavior in detail, the analyst would recommend that the company close certain customers’ card accounts or reduced the amount of credit extended to some customers. Check out this piece from Harnham to get an idea of what is involved.
Education For Credit Analysis
Credit analysts need to have, at a minimum, a bachelor’s degree in finance, accounting, or a closely-related field of study. Collecting such a degree will require you to complete extensive coursework in accounting and finance, calculus, economics, statistics, ratio analysis, industry assessment, and financial statement analysis. All of these subjects are critical in the day-to-day work of credit analysts; they help analysts assess financial risk accurately. Industry assessment and ratio analysis are becoming important for credit analysis because an accurate risk assessment for a company has to include an assessment of the environment in which it operates.
There are a few employers out there who do not require their analysts to have finance-related bachelor’s degrees. Certain banks and other financial institutions promote their analysts from within and provide them with all of the training they need to perform their jobs properly. Even without a bachelor’s degree in a financial field, some level of experience in the financing or accounting industry is required. Some companies require their credit analysts to secure a certification as a Chartered Financial Analyst, or CFA. (Learn more about the CFA credential in our article on the subject.)
Key Skills For Credit Analysts:
Attention to detail is crucial in credit analysis. Overlooking a single piece of data can call the accuracy of an entire assessment into question. Clients and employers trust their analysts to make credit decisions which carry a great deal of financial weight.
* Quantitative Analysis
Reading, assembling, modifying, and interpreting numerical (i.e. financial) data for their clients is part and parcel of the credit analyst’s job.
* Communication Skills
Credit analysts need to be able to convey their findings to coworkers, superiors, and clients in a clear and effective manner. Good communication skills (both oral and written) are necessities.
* Industrial Specialization
Many credit analysts end up concentrating most of their attention on individuals in certain situations or, most commonly, businesses in a particular industry. Analysts serving this sort of function need to develop some insight into the particulars of the industry they’ve chosen to work with.
* Prioritization And Multitasking
The credit analyst needs to be able to work on multiple projects simultaneously and prioritize them in accordance with his or her own best judgment.