Analyzing a Career in Credit Analysis

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Chizoba Morah
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Chizoba Morah is a business owner, accountant, and recruiter, with 10+ years of experience in bookkeeping and tax preparation.
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Updated December 28, 2023
Reviewed by Andrew Schmidt
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Suzanne Kvilhaug
Suzanne Kvilhaug
Fact checked by Suzanne Kvilhaug
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Suzanne is a content marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies for financial brands.
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A credit analyst is responsible for assessing a loan applicant's ability to repay the loan and recommending that it be approved or denied. Credit analysts are employed by commercial and investment banks, credit card companies, credit rating agencies, and investment companies. They may also work in the credit departments of a wide range of companies.

Key Takeaways

  • Credit analysts determine the creditworthiness of loan applicants.
  • An undergraduate degree in business, accounting, or finance and familiarity with spreadsheet software are typically required.
  • Credit analysis can be a pathway to other jobs in banking and finance.

What Does a Credit Analyst Do?

A credit analyst gathers and reviews financial data about loan applicants, including their payment habits and history, earnings and savings, and spending patterns. The credit analyst then recommends approval or denial of the loan.

The analyst may also be involved in reviewing problem accounts. For example, a credit analyst working at a bank that issues credit cards may review data about clients who have defaulted on their payments. The analyst might recommend closing the card or reducing the credit line.

Alternatively, an analyst might recommend that credit line extensions be given to customers with strong payment histories.

Educational Requirements

The minimum educational requirement for the position of credit analyst is usually an associate or bachelor's degree in finance, accounting, or a related field. Applicants should be familiar with basic accounting and finance, statistics, ratio analysis, calculus, economics, industry assessment, and financial statement analysis.

An understanding of all of these subjects is necessary for anyone working in a job that requires risk assessment.

Some banks and companies provide on-the-job training in credit analysis to candidates who do not have finance-related degrees. They still may require work experience in an accounting or finance-related field or a graduate degree in a business-related field.

Note

Depending on the level of the job, a company might require that a candidate have a Chartered Financial Analyst (CFA) designation.

Other Required Skills

Some other skills that a credit analyst typically must possess include the following:

  • Diligence: The job requires great attention to detail. As a credit analyst, any missing piece of information may lead to an incorrect analysis of a customer and a costly problem for the company.
  • Quantitative analysis skills: A credit analyst has to be able to review or create a set of numbers and understand what they mean.
  • Written and oral communication skills: A credit analyst must be able to effectively report results and decisions orally or in writing.
  • Industry knowledge: For some jobs, a credit analyst may need specialized knowledge of a particular industry. If you line up an interview with a retail giant or an automaker, do some research in advance so that you can talk intelligently about the industry and its challenges.
  • Multitasking and prioritization skills: A credit analyst needs to be able to work on multiple projects at the same time and prioritize them properly. This will be expected on the job.
  • Experience with financial software: A credit analyst has to be comfortable using Microsoft Excel or similar software used to analyze numerical data.

Benefits of Being a Credit Analyst

Credit analysts are in demand in a wide range of businesses in addition to banks and credit rating agencies. Auto manufacturers, retail store chains, and even utilities and energy companies extend credit to their customers and hire credit analysts to help them do it.

The job can be a pathway to a career as an investment banker, portfolio manager, or loan and trust manager.

The average salary for a credit analyst as of May 2022 was $92,180, according to the U.S Bureau of Labor Statistics.

Being a credit analyst can be a stressful job. You often must decide whether a person or a company can make a purchase, and at what interest rate, which is a significant responsibility.

What Is Ratio Analysis?

Ratio analysis is the process of comparing two numbers as a percentage of each other. For credit analysts, ratio analysis is critical to helping them evaluate a potential borrower's credit worthiness. Credit analysts may review ratios like debt-to-income ratio or metrics on a company's financial statement to guide them in making lending decisions.

How Do You Get a CFA Designation?

To get certified as a charted financial analyst (CFA), you must complete three tests that test your competence and integrity. The tests are 4.5 hours long and are set by the CFA Institute. You must also complete 4,000 hours of real world experience within three years and commit to the CFA Institute's code of ethics.

What Is Risk Assessment?

Risk assessment as used by credit analysts is the process of evaluating a potential borrower's risk to determine whether to lend money. A number of factors can be included in a risk assessment, such as income, debt, payment history, and length of credit history.

The Bottom Line

The right career path for you will depend on a number of factor. If you enjoy working with numbers and making calculations, you may enjoy working as a credit analyst. In this job, you'd be responsible for evaluating an individual's or a company's creditworthiness and making lending decisions based on your analysis. Weigh all the pros and cons of this profession, which can entail long hours and certification requirements, to determine whether it's right for you.

Article Sources
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  1. University of West Virginia. "Example Career: Credit Analysts."

  2. CFA Institute. "Exam Information, Dates, and Fees."

  3. U.S. Bureau of Labor Statistics. "Occupational Employment and Wages, May 2022 13-2041 Credit Analysts."

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