What AreCredit Analysts?
Credit analysts are the professionals in the finance industry who determine the ability of companies, people, and securities.
A credit analyst's job is to analyze and review the borrowers' credit history to determine if they can repay the credit within a given time. They also determine if the borrower's current financial or economic condition favors making the repayment.
Credit analysts usually have academic backgrounds in finance, accounting, or economics. Credit analysts generally work in commercial banks or other financial institutions.So, a fresh graduate from the mentioned academic background above can choose their career as a credit analyst.
These types of employment are offered in various places like:
- Commercial banks
- Credit unions
- Investment companies
- Insurance companies
- Credit rating agencies
- Asset management companies
Credit analysts who work in commodity contracts, securities, and other sections of financial institutions have the opportunity of earning the highest among other analysts.
The average salaryof credit, the analyst is around $85,000 annually, and the highest amount one can get from this job is $125,000 annually in 2020 in New York state.
Credit analysis is both entry-level and experienced level work. One can start a career as an entry-level analyst with moderate pay and get promoted with experience and performance. So, it is a very good choice as a career.
How Credit Analysts Work?
A credit analyst's first job is to collect and gather the data and information about the borrower. This means reviewing the borrower's credit history, financial conditions, earnings, liabilities, and assets they own.
The analyst looks for indicators that the borrower might present a level of risk.
They use the borrower's data to determine whether they should approve or deny the credit. One of the major works of the analyst is to use financial statements and ratios to analyze the potential borrower's financial history.
After analyzing all these, they decide whether the borrower has adequate assets to repay the credit based on industry standards. Analysts use several documents to collect information, such as:
- Annual reports
- Profit and loss statements
- Financial statements
- Management accounts
- Additional market data reports
They also use some additional tools and reports as well, and those are:
- Analysts use both mathematical and statistical developing models to measure risks
- Recording anticipated economic environment changes
- Analyzing periodic market patterns
- Tracking legislation and government policies
To become a credit analyst, one must have an academic background in finance, accounting, or economics. Unfortunately, if a candidate has a bachelor's degree or above, sometimes the employer overlooks the need for prior experience.
Some have advanced level certifications, such as CPA, CFA, or any state-recognized training.
Credit analysts also help the borrower with the paper works. For example, when borrowers don't understand how credit analysis works, analysts educate them about it. This helps to build a trustworthy relationship between analyst and borrower.
Credit Analyst Pay Guide
Credit analysis is a globally recognized profession that is very popular among young graduates. Some companies provide highly rigorous training and education to newly appointed analysts.
It is among the most recognized and prestigious designations in banking and finance. Employees are sometimes awarded based on their performance and dedication to their work.
Highly efficient education and training are provided during office time so that the newly employed employee knows what s/she has to do. Compensation depends on the experience level of the employees.
It is very important to know that the total compensation of analysts includes many components and not just base pay. We can estimate the median salary of every level of experience. The compensation increases based on the performance and experience of the analyst.
Compensation has been mentioned below, from the least experienced analyst to the most experienced analyst. According to theBLS, the approximate total amount of the compensation has been mentioned based on the experience level.
The table below summarizes credit analyst compensation, including average annual salary, years to promotion, and bonus potential across different experience levels.
| Experience Level | Average Annual Salary | Years to Promotion | Bonus Potential (Annual) |
|---|---|---|---|
| Entry Level (0-2 years) | $46,876 | 2-3 years | Varies |
| Mid Level (2-4 years) | $47,000 - $55,000 | 4-6 years | Up to 5% of salary |
| Experienced (5-10 years) | $61,422 - $93,000 | 7-10 years | 5 - 10% of salary |
| Senior (10-20 years) | $92,000 - $ 150,000 | 11-15 years | 10 - 15% of salary |
| Veteran (20+ years) | $393,700 | 15+ years | 15% or more of salary |
Bottom Line
The states who have the highest employment opportunities for credit analysts are:
- Illinois
- California
- Texas
- New York
- Florida
Choosing credit analysis might be a promising career if you are interested in accounting and finance and intend to help consumers and companies make decisions about reducing financial risk and extending credit.
According to theU.S. Bureau of Labor Statistics (BLS), the average annual wage for credit analysts was $86,170 in 2020, and the estimated wage range for credit analysts in 2020 was $44,250 to $146,690. So, one can undoubtedly make a promising career in this field.
