What is the role of a Credit Analyst?
The main responsibility of a credit analyst is to examine an individual's or company's creditworthiness. Credit analysts collect all the financial information from customers, such as earnings and repayment history, to make evaluation of their ability to meet various financial obligations.
A borrower's previous financial and credit history is examined by a credit analyst to determine their financial health and ability to repay the credit extended by a lender. Commercial and investment banks as well as private equity firms typically hire credit analysts.
To assess a borrower's financial health, the credit analyst collects and analyses important financial information using financial ratios. Their cash flow analysis is based on industry benchmarks to determine if borrowers cash flow is sufficient to repay.
After reviewing company lending policies and credit analyst recommendations, the underwriter decides whether or not to credit to a customer.
Credit Analyst career analysis-
There are five main categories of a credit analyst career and they are as follows:
Consumer credit analyst- the main work of a consumer analyst is to evaluate the financial condition of a person or a company.
Corporate credit analyst- the corporate credit analyst examines the credit risk of a non financial firm, such as trading firms, manufacturing enterprises, and so on.
Financial institution- they do analysis of financial institutions that are related to multiple transactions as counterparty risk.
Sovereign or municipal- They are mostly trained to rate agencies that give sovereign credit rating and analyse a nation on the basis of tax collection, government spending, fiscal deficit, etc.
Credit investment analyst- They analyse fixed income securities that are issued by various governments, for example- corporate bonds issued by corporate firms.
The career of a credit analyst starts with a position of a junior analyst after getting the degree in accounting finance or any other business related field along with quantitative and ethical focus. Some of the roles deal with consumer credit examination. In some companies, the senior-most analyst oversees a team handling common analysis for a particular market, region or company.
If you become a top-performing analyst, you can rise into financial management positions after overseeing analytical departments, making final credit decisions and monitoring departmental performances as well.
Strengths and weaknesses of a credit analyst are questioned in each step. Be ready to answer them honestly and you'll get closer to the promotions. There are various benefits of being a Credit analyst that are so much in demand in a huge range of businesses also in addition to banks and credit rating agencies as well. Retail store chains, auto manufacturers and utilities and energy companies also extend credit to their customers and hire some credit analysts to help them do what they do the best.
The job of a credit analyst can be a great pathway to a career as a portfolio manager, investment banker or even a loan and trust manager.
Skills required in Credit Analysts-
Being a credit analyst is not very easy, you require some of the significant skills in order to pursue this job role in a very respected industry or a business.
Here are some of the essential skills required in credit analysts-
- Analytical and Quantitative skills- if you want to be a Credit analyst you need to review different types of financial documents related to the clients business. The client can be an individual or or a borrower but is required to evaluate and assess all the information contained in the client's financial documents. A Credit analyst should be able to identify critical areas such as errors, fraud omissions that might affect the credibility of lending.
- Hands-on knowledge in financial software- if you are a Credit analyst you need to have a skill in statistical software required in the evaluation process to get ratios and evaluate large volumes of data within a shorter span. Many credit analysts use Microsoft Excel and other spreadsheet applications around the world to analyse and sort volumes of data, draw graphs and charts and generate the financial models as well. If you properly learn how the software works it can be a great time saver for you as a Credit analyst and recruiters will definitely give preference to such candidates.
- Ability to work under pressure- the work schedule of a credit analyst is very hectic because it involves interaction with multiple clients and multiple projects all at the same time. You should have this important skill because if you learn how to prioritise urgent tasks first and less urgent tasks in the end it will make your work easier. This skill will allow analysts too to meet their clients demand and work towards achieving overall companies targets.
- Due diligence- Credit analysis is a field which requires a high amount of caution and care while evaluating the financial health of a borrower. A Credit analyst is required to pay great attention to each and every detail when they are reviewing client documentation. Most of the borrowers are corporate clients who take credit revolving around millions of dollars and thus, it means if the application is approved without detecting any errors the lender will be at risk of losing lots of funds.
Thus, if you want to be a Credit analyst you are required to pay attention while conducting a review of the client's financial documentations and it will help you discover critical errors and omissions.
How to become a credit analyst?
- To become a credit analyst you're required to complete your bachelor's degree in accounting, finance or any other field related to ratio analysis, economics, statistics, calculus, financial statement analysis, risk assessment and so on. These subjects are very significant to function if you're a credit analyst because they help a lot in risk assessment.
- It's very essential to study topics like industry and ratio analysis in school because assessing a company's risk involves looking at its environment. You can also go for post-graduation or diploma in banking and finance, which will provide you with a thorough understanding of these major areas.
Here are five major points you need to focus in order to become a credit analyst-
- Pursue proper education- as stated above, you need to focus on the education and pursue bachelors with the required subjects and be up-to-date on changes in the industry as well. Try to keep studying them.
- Gain work experience- in order to gain experience you can begin with adjacent industries like banking or collections and then utilise your work experience to advance your career and get a job as a proper credit analyst.
- Earn technical Certifications- this is not necessary but try considering this point so that you can earn a professional financial certification in risk management and analysis and it will end up sharpening your applicable skills.
- Prepare your impactful resume- make your resume as impactful as you can by including the highest level of education and then mention relevant certifications and your work experiences. Try to keep your resume concise, relevant and clear because it will help you get the finest job in the industry.
- Apply to various entry-level jobs or support roles- consider reviewing the current job market in your area and apply to the positions that you are qualified for. Try creating a good cover letter that helps in highlighting your specific skills and traits because it emphasizes your suitability for the role as well.
Benefits and limitations credit analysts-
The work of a credit analyst is really stressful. It can really affect your mental health because once you become a Credit analyst you will have to deal with multiple projects with even short deadlines. Sometimes the work stress can lead to compromising patients with the quality of work. As mentioned above, the work routine of a credit analyst also contains taking urgent projects along with the multiple clients altogether.
If you are a more experienced credit analyst then you may experience even harder time dealing with all these projects at the same time.
It is not possible to enter this field if you have zero knowledge about software required in working as a Credit analyst. But there is a positive sign that even inexperienced credit analysts go for formal training. You can get the skills through on the job training and guidance from the other credit analysts of the company.
Another very major limitation of this field is that even a small mistake can cost big amounts. If you are not someone who is good at analysing and re-revising your work, then you should try seeking proper training from the best experts who are experienced in this field for a very long time.
If you miss an error or a fraud, it can affect the lending process and the lender will be at utmost risk of losing his funds.
With limitations comes the important benefits. Every field has a limitation but what makes them exceptional is the more benefits that come hand-in-hand. There are strengths and weaknesses of a credit analyst that also go hand-in-hand. The work environment here will make you work stronger and overcome every obstacle.
The first and the most important benefit of credit analysis is the salary package given to them. According to a survey by Salary.com, a Credit analyst with a bachelor's degree gets between $44k and $55k. Amount is pretty solid and it keeps increasing according to the promotions and role switches.
If you are a Credit analyst, trust us your degree can lead you to higher and more exciting career paths in the finance sector. There are times when credit Analysts are assigned to work with brands and companies that operate in a particular industry and in this way they get a great understanding of the ins and outs of that industry. It becomes so amazing to work in a positive environment where you get to know so many things about the companies or firms of a particular industry.
Your career progression can also be driven by your performance acquisition and experience of the significant professional qualifications. Employees who have consistently high levels of performance experience may get eligible for promotion every two or three years.
After you reach the top level of the career, you might be working as a senior manager or a managing director. Credit analyst job roles go from the front end roles to investment managers and traders.
Top Companies offering the role of credit analyst-
- HSBC- is offering more and more opportunities and support that will make the credit analyst grow more. As a Credit analyst at HSBC, you'll have a range of functions and responsibilities overseeing the process of credit analysis in review and associated MI services and keep track of the highest standards of quality of work and be consistent towards the work.
- Goldman Sachs- a leading global investment banking and investment management company that supplies a wide range of financial services to diversify client structure. They are offering job roles for credit analysts with a quite good package. As a newbie, you get an amazing chance to prove your analyst skills here.
- Barclays- Barclays is a brilliant British bank which is diversified by different types of customers clients and so on. They are also offering various roles for credit analysts and one of them is "senior analyst credit strategy". The job requires full time.
These three are the brilliant companies where you can apply for the role of credit analyst. Make sure to mention each and every skill of yours to enhance your chances of being selected as a top credit analyst.
The job role of a credit analyst has a wider scope than you can imagine right now. Most of the top companies globally are offering the roles of credit analyst and with a good package. Everyone is now focusing on the finance part and studying this field. Students are also opting Finance as their career option and thus, the role of a credit analyst is the topmost with the surprisingly interesting work environment.
Do not forget that there are various strengths and weaknesses of credit analysts. You have to study them and seek better guidance from someone who's experienced enough. In a company as a credit analyst, it is so important to be aware of your strengths and weaknesses.
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