Credit analyst jobs encompass a wide range of positions. In general, a credit analyst is responsible for helping a lender or other financial institution – or even a potential employer – determine how risky it is to offer an applicant a loan or a line of credit.
Anytime a company is considering providing someone or something (a company) with more debt (borrowed money that must be repaid), the lender needs to possess and understand several pieces of information. The information includes the following:
The industry the applicant works in
How much the applicant earns in income
Opportunities for additional income/revenue
The applicant’s history of borrowing and repaying debts
While credit analysts typically assume the abovementioned overall responsibilities, there are several specialized credit analyst job titles or positions that come with more specialized responsibilities.
The basic responsibility of any individual in a credit analyst position is to gather both financial and personal information to determine how creditworthy an individual or corporate borrowing applicant is.
There are several specific jobs, or areas, that credit analysts may be focused on. Such jobs include commercial credit analyst, credit research analyst, and credit and collections work.
Researching an applicant’s financial information is vital to help lenders understand how capable the applicant is of being able to repay debt.
Commercial Credit Analyst
A commercial credit analyst works to determine the creditworthiness of applicants who are applying for commercial loans or lines of credit. The applicants are, typically, medium to large businesses or corporations.
When an applicant uses a commercial credit union – or any lender – for a commercial loan or a major line of credit, the applicant will almost always meet with a commercial credit analyst. Commercial credit (commercial debt) is frequently sought by companies looking to fund a new product line, boost their manufacturing processes, or expand their business as a whole. For this reason, commercial credit is almost always dealing with sums of money substantially greater than the amounts associated with a personal loan.
Credit Research Analyst
A credit research analyst often works closely with other analysts. Credit research analysts are directly responsible for performing the due diligence (the research) necessary to gather critical financial and personal information about individuals (or companies) applying for a loan or a line of credit.
A credit research analyst is tasked with researching a plethora of information about an applicant. The information commonly includes:
Income statements/earnings information
Company balance sheets
Credit and Collections Analyst
Finally, there are credit and collections analysts. They perform a careful analysis of an applicant’s financial and personal information in order to help determine how creditworthy the applicant is. In addition, credit and collections analysts may also work with collection agencies in a combined effort to begin obtaining debt repayments.
While not an absolute necessity in order to be hired as a credit analyst, a bachelor’s degree in economics, finance, or a related major field of study is almost a “must-have” requirement. Also, employers strongly prefer previous experience in financial analysis.
Credit analysts need to possess a firm fundamental understanding of basic financial and financial risk principles. They must also keep themselves updated with the policies of major credit bureaus and, of course, possess a thorough understanding of credit reports. The more expertise they have in financial risk assessment, the better.
One emerging trend in the industry is the movement toward utilizing more than just standard credit reports and income analyses to assess a client’s creditworthiness. Therefore, it’s important for credit analysts to be able to “think outside the box” and find new, reliable metrics for risk assessment.
Credit analysts must research, collect, collate, and analyze a large amount of financial information. It means that they must be good detail workers. While they often work alone, they also frequently work alongside other people and act as a liaison between lenders and borrowers. In short, good people skills are needed, along with strong financial skills.
Among the top skill set requirements for credit analysts are data analysis, financial analysis, financial modeling, and working with MS Excel. CFI’s Financial Modeling & Valuation Analyst (FMVA)® program is designed to help anyone become an expert in working with Excel, along with becoming a world-class financial analyst. If you are interested in working in the field of credit analysis, becoming FMVA certified can help you gain a significant edge in the industry, making it easier for you to obtain top jobs and command the highest possible salary.
Salary and Compensation
According to the Bureau of Labor Statistics, the 2018 median average salary in the U.S. for credit analysts is about $71,500. Career paths for credit analysts often include moving up to positions such as vice-president of lending, senior financial analyst, risk analyst, or credit risk manager. The median annual salaries for individuals occupying such positions range from around $80,000 to $100,000+. Credit analysts who specialize in risk assessment may move on to work in the fields of hedge funds or private equity.
CFI offers the Financial Modeling & Valuation Analyst (VAFM)™ certification program for those looking to take their careers to the next level. To keep learning and developing your knowledge base, please explore the additional relevant resources below: