Credit Analyst Interview Questions

What are the Most Common Credit Analyst Interview Questions?

This guide outlines the most common credit analyst interview questions and what CFI believes are the best answers to them!

In order to ace your next interview, you’ll need to focus on being well-rounded, which includes the following:

1. Technical skills (finance and accounting)
2. Social skills (communication, personality fit, etc)

This guide focuses solely on the technical skills that could be tested in a credit analyst interview. To learn more technical skills, check out CFI’s Credit Analyst Certification program. Below are our top credit analyst interview questions.

Types of Credit Analyst Interview Questions

The following are the main types of credit analyst interview questions:

1. Personal Questions

The personal questions are prepared to help the recruiter understand the candidate better and see how their skills and competencies match the requirements that the company is looking for in potential hires. Sometimes, companies can use personal questions as screening questions in the first round of interviews to evaluate the personal traits of a candidate and determine if they fit within the work culture of the company.

However, in companies where the hiring process is not split into several rounds of interviews, the interviewer can ask personal questions at any part of the interview. The employer can use personal questions to understand a candidate’s personal traits, work ethic, educational and professional background, work style, and how they handle stress.

Examples of Personal Questions:

• Tell me about yourself.
• What are your strengths and weaknesses?
• Where do you see yourself in the next five years?
• Can you work under pressure?
• How do you handle stress, and can you give an experience you had regarding the same?

2. Finance and Credit Questions

Credit analysis is a numbers job, and the credit analyst is required to analyze financial statements and other documents in order to determine the creditworthiness of a client. They will be required to analyze the financial statements, such as the balance sheet and cash flow statement, over the past five or more years and derive information to help them make a judgment on the financial ability of the company.

The analyst should be proficient in using financial software to create financial models when one or more variables change to estimate the valuation of a company. The interviewer will ask finance-specific questions to assess the candidate’s knowledge of financial statements, financial ratios, financial modeling tools and techniques, and their experience with financial software such as MS Excel and R.

Sample Finance and Credit Questions:

• What are the 5 C’s of Credit, and how are they used?
• What considerations would you make to decide whether to lend $10 million to a new corporate borrower?
• Is there a specific debt-to-capital ratio that banks target?
• How would you handle a long-term client who wants a $10 million loan that, in your assessment, is considered risky?
• What are the current SOFR and Treasury rates?

3. Work Experience Questions

Qualified candidates looking for a senior credit analyst position should expect questions on their work experience and the projects and assignments that they worked on. The interviewer may be interested in knowing the skills that the applicant acquired from the previous employment, how they handled difficult clients, etc.

The employer may also want to know how the candidate used their problem-solving skills to solve a complex problem or help the company save on some expenses.

Examples of Work Experience Questions:

• How did you handle difficult clients?
• Tell me about a complex problem or situation that you encountered in your previous employment, how you solved it, and its impact on your employer.
• What tools did you use to develop financial models? Were they effective?
• Did you mentor someone in your previous employment? How did you help that person, and did you see any improvement in their skills and/or knowledge?
• What evaluation metrics did you use to evaluate the financial health of your clients?
• What would you say was your most difficult situation in all your previous positions, and how did you resolve it?

4. Industry Knowledge Questions

The interviewer may ask certain industry-specific questions that are relevant to the position. Ideally, the employer is interested in learning about a candidate’s knowledge of specific tools, techniques, or evaluation methods.

The applicant should also keep abreast of the latest innovations and improvements in the industry they are required to analyze. For example, an investment company that acquires companies in the health industry may gauge its knowledge about the industry and how health companies are valued.

Example of Industry Knowledge Questions:

• What are the credit metrics that banks look at when extending credit?
• How do you calculate the terminal value in a Discounted Cash Flow evaluation method?
• How different is NPV from DCF?
• What is your experience with Microsoft Excel as a financial analysis tool?
• What skill set do you have that makes you the perfect candidate for this position?
• What qualities will you consider when lending to a fintech startup?

Sample Credit Analyst Interview Questions and Answers

1. What is a reasonable debt/capital ratio?

It completely depends on the industry. Some industries can sustain very low debt to capital ratios, typically cyclical industries like commodities or early-stage companies like startups. These might have a 0-20% debt to capital ratio. Other industries such as banking and insurance can have up to 90% debt to capital ratios.

Many analysts also use the debt to equity ratio.

2. How would you decide if you can lend $100 million to a company?

Review all three financial statements for the past five years and perform a financial analysis.  Determine what assets can be used as collateral, how much cash flow there is, and what the trends of the business are. Then look at metrics such as debt to capital, debt to EBITDA, and interest coverage.  If all of these metrics are within the bank’s parameters, then it may be possible to lend the money, but the decision will depend on qualitative factors as well.

3. What do the credit rating agencies do?

Rating agencies are supposed to help provide trust and confidence in financial markets by rating borrowers on their creditworthiness of outstanding debt obligations. They can, however, run into conflicts of interest and should not be blindly relied on for assessing a borrower’s risk profile.

4. What is the current SOFR rate?

Quote a recent range of SOFR rates and talk about the importance of SOFR as it relates to spreads and pricing of other credit instruments.

5. What is free cash flow?

Free cash flow is simply equal to cash from operations minus capital expenditures (levered free cash flow). Unlevered free cash flow is used in financial modeling.

6. What methods do you use to compare the liquidity, profitability, and credit history of a company?

The Current Ratio, Return on Equity (ROE), Return on Assets (ROA), Debt/Capital, Debt/Equity, and Interest Coverage ratios.

7. What is the interest coverage ratio?

This is commonly calculated as EBIT divided by interest expense.  It is also referred to as the “times interest earned” ratio.  The interest coverage ratio indicates how easily a company can “cover” its interest expense with operating earnings before interest and taxes are subtracted.

8. What are the most common credit metrics banks look at?

The most common credit metrics include debt/equity, debt/capital, debt/EBITDA, interest coverage, fixed charge coverage, and tangible net worth.

9. How do you value a company?

The most common methods are DCF valuation / financial modeling and relative valuation methods using comparable public companies (“Comps”) and precedent transactions (“Precedents”).

10. What do you use for the discount rate in a DCF valuation?

If you are forecasting free cash flows to the firm, you normally use the Weighted Average Cost of Capital (WACC) as the discount rate. If you are forecasting free cash flows to equity, you use the cost of equity.

11. How do you calculate the terminal value in a DCF valuation?

Terminal value is calculated either using an exit multiple or the perpetual growth method.

12. What type of person makes a good credit analyst?

Someone who’s detail-oriented, good with numbers, enjoys research and analysis, likes working independently, and is good at financial modeling and financial analysis, with strong Excel skills.

13. How do you manage risk in your personal life?

This is where you get to show some personality and demonstrate your ability to think about risk, plus be a good communicator. There is no right or wrong answer to this question, but you could say something about how you evaluate tradeoffs (upside vs downside), how you put hedges in place to reduce losses, purchase insurance, or you can use a wide range of other examples.

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More Interview Guides

If you’re looking for more practice, there can be a lot of overlap between interview questions for credit analysts and other areas of corporate finance.

Interview questions and answers you may find helpful:

• Investment Banking
• Equity Research
• Economics
• Behavioral Interview Questions
• Accounting
• Finance

Other Career Prep Resources

In addition to the above credit analyst interview questions, we have developed an entire program for becoming a certified credit analyst.

Our interactive career map is one of our most valuable tools for understanding how various jobs fit into the overall corporate finance universe.

Additionally, we offer several free courses for financial analysts, which will teach you all the technical skills you need to ace an interview!