Table of Contents
- What Is a Credit Analyst?
- Key Takeaways
- How Credit Analysts Work
- What They Analyze
- Educational Background
- Salary Information
- Special Considerations
- Other Analyst Recommendations
- Importance of Credit Analysts
- Credit Analysts and Credit Ratings
- What Skills Do You Need To Be a Credit Analyst?
- How Do I Become a Credit Analyst?
- Is a Credit Analyst a Good Job?
- The Bottom Line
What Is a Credit Analyst?
Let me tell you directly: a credit analyst is a financial professional who evaluates the creditworthiness of securities, individuals, or companies. I assess the likelihood that a borrower can repay their obligations by reviewing their financial and credit history, along with their overall financial health and economic conditions to see if repayment is feasible.
You should know that we typically come from backgrounds in finance, accounting, or related fields, and we work in various financial institutions.
Key Takeaways
As a credit analyst, I analyze the creditworthiness of companies and individual borrowers to identify potential risks for investors and lenders. I examine financial statements and apply ratios to review a potential borrower's financial history. You'll find us employed at commercial and investment banks, credit card issuers, credit rating agencies, and investment companies. Often, we're referred to as credit risk analysts since this is a specialized part of financial risk analysis. We assign scores to debt issuers and their instruments using letter grades.
How Credit Analysts Work
In my role, I gather and analyze financial data related to lending and credit products, including a borrower's repayment history, liabilities, earnings, and assets. I look for any signs that the borrower might pose a risk, and I use this data to recommend approving or denying credit, or to adjust credit limits and fees.
What They Analyze
A core part of the job is interpreting financial statements and using ratios to evaluate a potential borrower's fiduciary behavior and history. I determine if the borrower has sufficient cash flows by comparing ratios to industry benchmarks. For instance, if I'm at a bank, I might review an agricultural company's statements before approving a loan for new equipment.
Educational Background
You need a background in finance, economics, math, accounting, or a similar field to become a credit analyst. Employers prefer candidates with bachelor's degrees and experience, but they might waive experience for those with graduate degrees. Some of us hold advanced certifications, like those from the National Association of Credit Analysts. We work in banks, investment companies, credit unions, credit rating agencies, insurance companies, and asset management firms, with the highest salaries in securities, commodities, and investment areas.
Salary Information
The mean annual salary for a credit analyst in 2023 was $94,750, with the highest in the U.S. at $142,370 in New York State.
Special Considerations
We're often called credit risk analysts because this work specializes in financial risk analysis. I evaluate investment risks and set interest rates, credit limits, or loan terms for borrowers, using research to ensure affordable loans for borrowers and protection for lenders in case of default. I consider risk factors like economic changes, stock market fluctuations, legislative shifts, and regulatory requirements when recommending business loans or credit. If a business client can't meet payroll, it signals revenue decline and potential bankruptcy, impacting the bank's assets, ratings, and reputation.
Other Analyst Recommendations
Banks use our analysis to decide on loan approvals based on risk levels. Once approved, I monitor the borrower's performance and might recommend ending the agreement if risks increase. This risk assessment helps banks manage threats and generate revenue. For example, if someone defaults on credit card payments, I might suggest lowering their limit, closing the account, or offering a new card with a lower interest rate.
Importance of Credit Analysts
We play a crucial role in the economy's well-being, as credit drives financial activity. It gives consumers more spending power to improve lifestyles and provides businesses with temporary liquidity.
Credit Analysts and Credit Ratings
I may also issue credit scores, which are three-digit numbers from about 300 to 850. The common individual score is the FICO, generated automatically from payment histories, spending, and bankruptcies. For debt issuers and bonds, scores use letter grades like AAA (highest), down to lower ones. Below a certain rating, a company's debt is junk status, offering higher yields for added risk. Insurance companies get ratings from agencies like AM Best for stability, and sovereign bonds also have scores. Many of us work at agencies like Moody's or S&P for bond assessments.
What Skills Do You Need To Be a Credit Analyst?
You need accounting skills to create and analyze financial statements and ledgers. Many of us have expertise in risk analysis, mathematics, statistics, computing, and quantitative methods. Problem-solving, attention to detail, research abilities, and documenting findings are essential, along with understanding finance, banking, and business terms.
How Do I Become a Credit Analyst?
You'll usually need at least a bachelor's degree in finance, accounting, or a related field. Employers look for courses in statistics, economics, financial statement analysis, and risk assessment, plus some experience in accounting, banking, or finance. Certifications like CRC, CBA, CBF, professional certificate in credit, CCE, CFA, or CRA can help you get hired or advance.
Is a Credit Analyst a Good Job?
Yes, it's a solid job if you're interested in accounting or finance and want to help with credit decisions and risk reduction. The BLS reports a mean annual wage of $94,750 in 2023. Top industries include central banks, securities and commodities, insurance, and business support. Highest employment is in California, New York, Texas, Florida, and Illinois.
The Bottom Line
As a credit analyst, I analyze borrowers, companies, and securities for default risks. We typically have backgrounds in finance, accounting, economics, or related areas, and may hold certifications like CFA or CRA. We're employed by financial institutions and credit agencies, earning an average of $94,750 annually in 2023.
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