Thanks to the role Credit Analysis is playing in the financial crisis of 2008, more people than ever are aware of the importance of credit analysts. Credit analysts can work in many different industries and have many different roles, but the ultimate responsibilities of any credit analyst is to review an entity’s financial history in order to decide whether or not that entity should be given a loan. A role as a credit analyst comes with a large amount of responsibility, but if you have the appropriate skills for the role, it can be a great steppingstone in a financial career path, or a lucrative career in its own right.
Responsibilities
A credit analyst evaluates how risky a loan is to a specific entity, usually an individual or a company. In this instance, risk means the likelihood that an entity will default on its loan. A credit analyst’s evalation is often not as simple as yes or no. For example, a credit analyst may approve an individuals for a loan, but only if certain conditions are met. One of the highest stress aspects of a role as a credit analyst, is that the job comes with a high level of responsibility. Credit analysts can be responsible for everything from whether or not a family can receive a mortgage to purchase their dream home to whether a company can receive a loan to take advantage of an expansion opportunity.
Skills and Education
Credit analysts need to be able to evaluate financial data, including balance sheets and income statements. Credit analysts may also evaluate other information such as paying habits, savings, earnings, purchase activity, etc. They then need to be able to communicate their analysis in reports for both the lender and the client. In order to analyze all the relevant financial data, credit analysts will likely need a bachelors, ideally in a related field, such as finance, accounting, or economics. Credit analysts must also have conviction and confidence in their decision-making abilities, since their decisions can have a major impact on clients.
Types of Credit Analyst Roles
Credit analysts can work in a variety of different roles and fields. Even though the underlying aspects of credit analysis remain the same; reviewing and analyzing the creditworthiness of an entity, it can play out in many different ways. The most common employers of credit analysts are banks, insurance companies, and companies that issue credit cards. Other credit analysts jobs include working as a bond analyst for asset managers or private equity firms. Credit analysts may even work for rating agencies to help the agency rate a company or country on its riskiness.
Career Path and Compensation
Many credit analysts begin their career working in accounting, accounts receivable, or loan application and then move up to become credit analysts. A role as a credit analyst can then be a stepping stone to other positions in finance such as a portfolio manager or investment banker. Due to the wide range of different types of credit analysis jobs, the salary can vary greatly. While the average salary for a credit analyst in the United States is $64,546, the bottom 20% make $38,897 and the top 20% of earners make $107,108.
Is a Credit Analyst Role Right for You?
Credit analysis isn’t for everyone. A role in credit analysis requires the ability to analyze financial data, communicate findings, and make decisions with confidence and conviction. If this sounds like you and you’re looking for a position with a high-level of responsibility, then credit analysis may be a good fit.
