Who Is A Credit Analyst- Whenever an individual or a business need to obtain loan from a financial institution, the credit analyst is one of the 1st point of contact. It is the credit analyst that will ascertain if such an individual or business is worthy of the loan. The credit analyst will finally determine if the loan should be accepted or rejected. In the following paragraphs, we would explain in detail who a credit analyst is, what they do and how to become one.
Who Is A Credit Analyst
A credit analyst is a trained professional who does the evaluation of the credit worthiness of an individual or businesses who are making applications for loans or other kind of credit. They determine if the loan application of an individual or business would be accepted or rejected. Credit analysts usually check to see if the said borrower would be able to repay a loan if granted . They do this by analyzing the financial history of the individual or business. Some of the things being checked include financial statement , income, credit history and other factors that can affect the loan repayment. Credit analysts can get to work in banks, credit unions and other kind of financial institutions.
Responsibilities Of A Credit Analyst
A credit analyst acts like a “financial policeman” cross-checking to see if a loan applicant : be it individual or business is worthy of being granted a loan or not. Here are some of the duties being carried out by a credit analyst:
Review of loan applications
One of the first checks a credit analyst does is to go through the loan application submitted by an individual or business. They check for accuracy of information supplied, analyze the financial history and also their credit score.
Analysis of financial information
Another role of a credit analyst is to analyze financial statements , cash flow statements and credit records to ascertain the level of risk that will be involved if the loan will be granted to the client.
Carry out risk assessment
After analysing the financial status of the loan applicant, the credit analyst will go ahead to evaluate the risk level that it would take if the applicant is granted the loan.
Credit recommendations
Credit analysts go ahead to prepare credit recommendations and present such to the underwriters or loan officers.
Monitoring of existing credit
Credit analysts also follow up with current borrowers to check if they are experiencing any financial issues and make suggestions on how to mitigate risk.
Other Responsibilities Of A Credit Analyst
- Assist with audits of clients and company
- Take inquiries coming from lenders
- Ensure there is compliance with lending protocols.
Where Can A Credit Analyst Work
A credit analyst can work in different industries such as banks, investments firms, credit unions and other financial establishments.
Banks
This is where most credit analyst work. Such banks include commercial bank, retail and investment banks. The major work of a credit analyst is to check-out the credit-worthiness of a loan applicant, manage loan portfolios and make recommendations about loan requests.
Insurance companies
Credit analysts also work in insurance companies to assess the credit worthiness of its policy holders. They also evaluate the risk related with issuing insurance policies.
Credit unions
The operations in Credit unions are quite different from that of a bank. Loan operations in credit unions is majorly to serve the members of the union rather than making of profits. In credit unions, credit analysts evaluate loan applications and assess the credit risk of borrowers.
Government agencies
Credit analysts also work in government agencies e.g the treasury department or the federal reserve. They do risk assessment of companies that borrow money from government.
Investment companies
Investment companies such as mutual fund companies, private equity firms and others hire credit analysts to assess the creditworthiness of companies that issue bonds and other kind of debt securities. They also evaluate the risk related with investing in these securities.
What Skills Are Required To Be A Credit Analyst
To be a good credit analyst, the following skills are required:
Good communication skill
As a credit analyst, you will need to be able to communicate with your clients, stakeholders and management in clear terms.
Attention to details
You must have strong attention to details as you will be handling a lot of financial statements. You must be able to identify any inadequacy or inconsistency that may show up in the statements.
Industry Knowledge
As a credit analyst , you must understand the way your industry operates. You must know about industry trends, regulatory issues and even competitors , as these factors can affect the performance of a company.
Problem Solving skills
You must be able to detect possible problems and risks and then prescribe solutions to minimize such risks.
Adaptability
You must be able to adapt to fluctuating marketing conditions , industry trends and new regulations that could come up. At such times, you must be able to adjust your analysis and recommendations appropriately.
Time management
As a credit analyst, you must be able to plan and manage your time appropriately. You must be able to work under strict deadlines.
Financial Analysis
Credit analyst must be sound in financial analysis. You must know what to do with balance sheets, income statements and flow statements to get your desired results. You must be able to evaluate the financial performance of an organization based on the information obtained and also be able to assess their credit worthiness.
How Do I Become A Credit Analyst
So, if you are interested in pursuing a career as a Credit Analyst, the following are the minimum requirements:
- A bachelor’s degree in accounting, finance or related course. However, a Master’s degree in Finance, Business Administration or related course will be an advantage.
- Some years of experience in financial analysis or lending. You can always get such experience by taking up an internship program or starting up an entry-level position in a bank as a loan officer, underwriter or financial analyst.
- You will also need to get some professional certifications e.g CFA (Chartered Financial Analyst), this will help to build your knowledge and expertise.
- You will also need to develop some skills e.g financial analysis, communication skills, attention to details, decision-making, risk assessment, etc.
- You need to join a network of professionals in the industry. Be sure you stay updated with industry trends and regulations
- Update your resume and start sending out your applications.
Who Does A Credit Analyst report To
This actually depends on the structure and the size of the financial institution you are working with. A credit analyst usually reports to a manager or the supervisor in the credit unit of a financial establishment. Sometimes, the credit analyst may directly report to the Chief credit officer or some other senior executives in the establishment.
Last Word
A credit analyst is a major determinant factor in loan application and processing. He/She access the credit worthiness of the loan applicant and then present findings to the senior authorities (could be credit manager, chief credit officer, etc.). To be a credit analyst, you must have a bachelor degree in accounting, finance or related field. Also skills like financial skills, mathematical skills, attention to details and other skills are important on the role.
Frequently Asked Questions
What do I require to become a credit analyst?
To become a credit analyst, you need to meet the following requirements:
A bachelor’s degree in accounting, finance or related course
Some on-the-job-experience in finance , banking or accounting
Relevant certifications in the industry is also an advantage. Examples of such certifications include Credit risk certification (CRC), Credit Business Associate (CBA), Chartered Financial Analyst (CFA), Certified Risk Analyst (CRA).
What qualities makes a good credit analyst?
To be a good credit analyst, you should possess:
Excellent analytical skills
Good mathematical background
Proficiency in the use of spreadsheets, databases and basic accounting software.
Decision making and organizing skills
Research skills
What difference exist between a credit and financial analyst?
A credit analyst main responsibility is to ascertain the credit worthiness of an individual or business to determine if the loan application made by such will be granted or rejected. In contrast, a financial analyst work to handle the financial matters of a company.
What questions would I be asked in an interview for credit analyst position?
Here are some questions you need to prepare for if you will be attending a credit analyst job interview any time soon:
How do you value a company?
Can you explain what is involved in credit analysis?
What do you mean by credit analysis?
What are the roles of credit rating agencies?
What difference exist between a debenture and a bond
What are the different categories of credit facilities for companies
What is the meaning of interest coverage ratio?
What skills should a credit analyst possess
Mention the 5Cs of credit analysis
How do you determine the rating of a bond?
In simple terms, who is a credit analyst?
A credit analyst is a trained professional that works in a financial institution to assess and analyze the credit worthiness of customers to ascertain if their loan application can be granted or rejected or possible risks around a current debt.
References
- www. wikipedia. com- Credit Analyst
- www. wallstreetmojo. com- Credit Analyst Interview Questions and Answers
- www. indeed. com- Credit Analyst Job Description (Plus Salary and Skills)
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