What is a Credit Analyst?
Credit analysts are the professionals who assess the credit rating of companies or persons. In short, credit analysts are the professionals who determine the creditworthiness of a company or a person.
It is a method where the credibility of a person or business is assessed. In simple words, in this process, the loan eligibility of a person or business is determined. Therefore, if a company or person requests a loan, it is important to go through a detailed analysis.
The professional who analyzes the credibility is known as a credit analyst. It is very important to run a detailed credit analysis before issuing a loan to check the credibility of the person or the company.
In this modern job market, credit analysis is one of the most popular jobs among young people. Commonly, a lot of fresh graduates are seeking jobs as credit analysts. However, getting a suitable job in this competitive job market takes work.
Credit analysts review the borrowers' background history to analyze whether they can repay the loan within a given time or not. Then, it is their job to ensure they issue the loan to the borrower.
Credit analyst determines if the borrower has enough capabilities to repay the amount of the loan. To determine this, the analyst reviews the borrower's credit history andeconomic condition.
Credit analysts are required to have at least a bachelor's degree. They usually need academic backgrounds in finance, accounting, or economics. They generally seek jobs in commercial and financial institutions like banks or other institutes.
A fresh graduate is always welcome and encouraged to apply for these positions. However, before they apply, they need to ensure that their academic background and skills match the requirements for the position.
These opportunities are offered in various workplaces, such as commercial banks, credit unions, investment companies, insurance companies, credit rating agencies, and asset management companies.
Credit analysts have the opportunity of earning very high in the long run. In addition, it can create opportunities for the highest earnings among other analysts. This is because they work in commodity contracts, securities, and other sections of financial institutions.
What is the Average Credit Analyst Salary?
As reported byBLS, the average salary of a credit analyst is around $85,000 annually. $125,000 is the highest amount an analyst can earn annually, and it was estimated in 2020 by New York state, which is quite high compared to other analysts.
Credit analysts can apply for an analyst position based on their experiences and skills level, which can be both entry-level and experienced level. One can join the position as an entry-level analyst with comparatively low pay and can start earning a lot after a while.
According to the BLS, the approximate total amount of the compensation has been mentioned based on the experience level.
- Entry level ( 0 to 2 years of experience):Entry-level analyst gets $46,876 annually on average.
- Less than 5 years of experience:From 2 to 4 years of experience, an analyst gets $47,000- $55,000 annually.
- 5 to 10 years of experience:This is when mid-level starts, and the analyst gets $61,422- $93,000 annually.
- 10 to 20 years of experience:Senior level starts at this point, and the employee gets $92,000- 150,000 annually.
- More than 20 years of experience:At this highest level, the experienced analyst gets an average of $393,700 annually.
Typical Responsibilities of a Credit Analyst
A credit analyst’s main responsibility is collecting and gathering data and information related to the borrower. That means analyzing and reviewing the borrower's credit information and the past financial history of that person or company.
They also need to review the borrower's earnings, liabilities, and assets. It is very important to carefully review the history before issuing the loan, or it will be a disaster for the loan issuing company.
Their main job is to collect data about the borrower’s financial history and determine if they should get approval for the loan or get rejected. So, their job is very important and crucial. They also get to work with financial ratios and financial tools.
After working with all the collected data, it needs to be decided based on the industry standards if the borrower has adequate assets to repay the loan. Analysts collect information from several documents, such as annual reports, profit and loss statements, and financial statements.
Some additional tools and reports are also used, such as recordings of anticipated economic environment changes, periodic market patterns, legislation and government policies, and mathematical and statistical developing models.
Typically analysts in the finance industry have an academic background in finance, accounting, or economics. Most importantly, the applicant in these roles must have adequate knowledge about the finance industry to apply for the desired position.
Candidates must have at least a bachelor’s degree or above to apply for the position. However, the employer sometimes overlooks the need for prior experience if the applicant has relevant skills.
If the candidate has relevant and advanced level certifications, such as CPA, CFA, or any state-recognized training, it will get noticed and prioritized. However, it is important to review the required skills before applying for any position.
Credit analysts develop relationships with borrowers to gain their trust. Borrowers get educated by them about credit analysis in detail and the nature of the work. Borrowers also get help with paperwork from them which is very helpful.
Credit Analysts and Credit Ratings
Credit rating companies issue credit ratings, and they are presented in the form of credit scores. A credit score is a three-digit number that starts from 200 to 850. FICO score is the most common type of individual credit score.
Credit score gets generated by analyzing the past credit history, the number of bankruptcies, and other financial conditions of the borrowers. So, credit scores play a very vital role.
Letter grades are used to evaluate bonds. In this pattern, letter grades go on like AAA, AA+, and BBB, where AAA is the highest rating. The company's debt is considered junk if the grading rate goes below a certain level.
Yields evaluate credit risks. After a certain level, the yield of a particular company is determined as junk. Some investments typically carry higher yields to accommodate for the additional credit risk.
Best-rated insurance companies are based on their financial stability and credit risk. Credit analysts often work at credit rating agencies like Standard & Poor's (S&P) or Moody's to evaluate bonds.
The companies who pay the credit analysts the highest are monetary authorities like central banks, commodities, securities, financial investment companies, business support firms, and insurance carriers.
Illinois, California, Texas, New York, and Florida are the states who have the highest employment opportunities for credit analysts. Central banks, commodities, securities, financial companies, and insurance companies pay the credit analysts the highest.
If someone is interested in finance and accounting and intends to help people with financial planning and credit analysis, then it is high time to make a career out of it as an analyst. The finance industry is full of opportunities, and one should utilize them.
As reported by theU.S. Bureau of Labor Statistics (BLS), the average annual wage for credit analysts was $86,170 back in 2020, which is quite high compared to other contemporary jobs. $44,250 to $146,690 is the range of annual income one can get.
