Banks, credit rating agencies, the auto and retail industries — they all need credit analysts. They are essential players in finance because they help lenders reduce risks and make informed decisions about lending. Learn more about what a credit analyst does and how to become one.
What Does a Credit Analyst Do?
Credit analysts evaluate the creditworthiness of potential borrowers. According to the U.S. Bureau of Labor Statistics, they do this by:
- Estimating the level of risk associated with giving credit or making a loan
- Examining a person's or a company's financial statements and credit data
- Putting together credit reports for use in decision making
To make informed decisions, credit analysts use various financial models, statistical techniques, and risk assessment tools.
Scott Morrissette, Purdue Global business faculty member, owns a real estate investment company. He is well-acquainted with how credit analysts assess mortgages, which is usually the biggest loan consumers get.
“A credit analyst considers the financial picture of an individual or business,” Morrissette says. “They look at debt ratios, credit bureaus, and collateral. They measure risk based on predefined matrices.”
In addition to evaluating creditworthiness, credit analysts monitor the ongoing financial health of borrowers to ensure they continue to meet their obligations. They also provide recommendations to lenders on loan terms and conditions, such as interest rates and repayment schedules.
“There are many ways to finance purchases and many ways credit is analyzed,” Morrissette says.
Where Credit Analysts Work
- Banks and credit unions: Credit analysts in banks and credit unions examine loan applications, gauge the creditworthiness of borrowers, and choose the best lending terms and conditions. Additionally, they keep an eye on the borrowers' ongoing financial situation and advise lenders on how to modify the terms of loans, such as interest rates and repayment plans.
- Federal, state, or local government: Credit analysts assess the creditworthiness of people or organizations applying for loans, grants, or contracts from the government. Additionally, they evaluate the state of the government's finances and offer suggestions on how to manage their debt and credit risk.
- Finance companies: Credit analysts examine borrowers, evaluate loan applications, and choose the best loan terms and circumstances. Additionally, they keep an eye on the borrowers' ongoing financial situation and offer lenders advice on changes to loan terms, such as interest rates and repayment schedules.
- For-profit and nonprofit businesses: In addition to determining the creditworthiness of prospective clients and suppliers, credit analysts also evaluate their own company's creditworthiness and offer advice on how to control their debt and credit risk.
- Real estate: In the real estate sector, credit analysts assess prospective borrowers looking for mortgages or other types of real estate financing. Additionally, they determine whether to recommend investing in real estate development projects based on creditworthiness.
- Risk management: Credit analysts assess possible counterparties, such as other businesses or financial institutions, in risk management. Additionally, they evaluate the creditworthiness of investments and offer suggestions for controlling credit risk in portfolios.
- Securities: Analysts in the securities sector assess businesses that issue bonds and other financial instruments. They assess the risks associated with investing in these companies and make recommendations to investors on whether to buy or sell these securities.
Skills Required for a Credit Analyst
Morrissette details a number of skills required to be a successful credit analyst:
- Analytical: The ability to analyze complex financial data, identify trends, and draw accurate conclusions.
- Attention to detail: The ability to pay close attention to detail to ensure identification of potential risks and to make informed decisions.
- Communication: The ability to communicate their findings effectively to lenders, borrowers, and other stakeholders.
- Time management: The ability to manage their time effectively to meet deadlines and ensure timely loan approvals.
- Risk management: The ability to identify and manage various types of risks associated with lending money, such as credit risk, interest rate risk, and market risk.
“As a credit analyst, you must also have strong knowledge of the industry, high standards of integrity, and computer literacy,” Morrissette says. “You should have a love for statistics, ratio analysis, and problem solving. You have to be able to analyze the data and translate the numbers into something meaningful.”
Education Requirements for a Credit Analyst
O*NET OnLine reports that most employers require a bachelor's degree to be a credit analyst. Purdue Global offers several online bachelor's and master's degrees that prepare you to become a credit analyst.
Bachelor’s degrees:
“The bachelor's degree gets you in the door and is great for your career,” Morrissette says.
Master’s degrees:
“The master's degree may help you move up the ladder where you can be a part of strategic decision making,” Morrissette says. “At that level, you won't be making decisions for each individual loan application, but you’ll help create the requirements that everybody else follows. You can keep going up the ladder with higher education. And, of course, the years of experience are going to come into play as well.”
Morrissette says getting actual experience in the field is vital.
“There's really no substitute for real-world experience,” he says, “so we encourage students to explore internships, volunteer opportunities, or part-time positions. You can learn from a textbook, but you need to actually be out there in the real world where you can apply your knowledge. That's when you start realizing what you've learned.”
Many credit analysts also hold professional certifications, such as the Chartered Financial Analyst (CFA) designation or the Credit Risk Certification (CRC).
>> Read More: 5 Top Certifications to Enhance Your Finance or Accounting Career
Become a Credit Analyst With an Education From Purdue Global
“There will always be a need for credit analysts,” Morrissette says, “especially as people continue to open up businesses, become self-employed, and buy more big-ticket items such as homes and cars.”
Find out how Purdue Global can prepare you for the next level. Choose from the following degrees:
- Online Bachelor of Science Degree in Finance
- Online Master of Science Degree in Finance
- Online Bachelor of Science Degree in Accounting
- Online Master of Science in Accounting (MSA) degree
Reach out for more information today.
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