What Is a Credit Analyst?

The term "credit analyst" refers to a financial professional who assesses the creditworthiness of securities, individuals, or companies.

Credit analysts determine the likelihood that a borrower can repay their financial obligations. They review their financial and credit history and determine whether a subject's financial health and economic conditions are favorable for repayment.

These financial professionals generally have an academic background in finance, accounting, or a related field. They can find work at different types of financial institutions.

How Credit Analysts Work

A credit analyst gathers and analyzes financial data associated with lending and credit products. This includes reviewing a borrower's repayment history, along with 澳洲幸运5官方开奖结果体彩网:liabilities, earnings, and assets that they possess.

The analyst looks for indicators that the borrower might present a level of risk. The data are used to recommend the approval or denial of credit and to determin🍰e whether to increase or reduce credit limits or charge additional fees.

What They Analyze

A key component of their jobs is to interpret 澳洲幸运5官方开奖结果体彩网:financial statements and use ratios to analyze the fiduciary behavior and history of a potential borrower.

They decide whether the borrower has adequate cash flows by comparing ratios with industry data 澳洲幸运5官方开奖结果体彩网:benchmarks. For example, a credit analyst working at a bank may examine an agricultural company's financial statements before approv🐼ing a loan for new farm equipment.

Educational Background

Credit analysts are required to have a background in finance, economics, math, 澳洲幸运5官方开奖结果体彩网:accounting, or other related field. Candidates with bachelor's degrees and experience are pre🦄ferred, although a potential employer may overloo🐠k experience if someone has a graduate degree.

Some analysts also have 澳洲幸运5官方开奖结果体彩网:advanced certification, such as training offered through t🍷he National Association of Credit Analysts.

A variety of financial institutions employ credit analysts, including banks, investment companies, credit unions, credit rating agencies, insurance companies, and asset management companies. Those analysts who work in securities, commodities, and other investment areas earn the highest salaries.

Special Considerations

Credit analysts are often called 澳洲幸运5官方开奖结果体彩网:credit risk analysts. That's because 澳洲幸运5官方开奖结果体彩网:credit analysis is a specialized area of financಌial risk analysis.

Analysts evaluate the risk that investments hold and determine the 澳洲幸运5官方开奖结果体彩网:interest rate and 澳洲幸运5官方开奖结果体彩网:credit limit or loan terms for a borrower. They use their research to ensure that the borrower receives an affordable loan and the💞 lender is protected if the borrower defaults.

Analysts may recommend a business loan or business credit after considering certain risk factors. These factors may be environment-oriented, such as economic changes, 澳洲幸运5官方开奖结果体彩网:stock market fluctuations, legislative changes, and regulatory requir♚ements.

If a business client struggles to meet payroll, it could be indicative of a decline in revenue and potential 澳洲幸运5官方开奖结果体彩网:bankruptcy, which may affect the ba♋📖nk’s assets, ratings, and reputation.

Other Analyst Recommendations

🍸Banks determine wheth🌺er they want to approve certain loans by analyzing how much risk is involved in lending.

If a loan is approved, the credit analyst monitors the borrower's performance and may recommend terminating the agreement if it becomes risky. Determining the level of risk in a loan or 澳洲幸运5官方开奖结果体彩网:investment helps banks manage risks and generate revenue.

For example, a credit analyst may recommend a solution for an individual who has 澳洲幸运5官方开奖结果体彩网:defaulted on their 澳洲幸运5官方开奖结果体彩网:credit card payments. The analyst may suggest reducing their credit limit, closing their acco🔜unt, or offering them a new credit card with a lower interest rate.

Credit Analysts and Credit Ratings

Credit analysts may also issue credit scores.✨ A credit score is a three-digit number ranging from around 300 to 850.

The most common type of individual credit score is the 澳洲幸运5官方开奖结果体彩网:FICO score. Credit score generation typically is automated for individuals using algorithmic processes based on their credit payment histories, spending, and past bankruptcies.

Scores for debt issuers and their instruments, such as bonds, are represented by letter grades. The highest is AAA, followed by AA+, BBB, and so on.

A company's debt is considered junk, or not investment grade, once it drops below a certain rating. These investments typically offer investors higher yields in exchange for the additional credit risk.

Insurance companies are rated on their credit risk and financial stability by rating agencies such as AM Best. The bonds of sovereign governments can also have credit scores. Credit analysts who assess bonds often work at credit rating agencies such as Moody's or 澳洲幸运5官方开奖结果体彩网:Standard & Poor's (S&P).

The Bottom Line

A credit analyst is a financial pཧrofessional who analyzes borrowers, companies, and securities to detect any potential ris💫k of default.

They usually have educatꦇional backgrounds in finance, accounting, economics, or a related field. They may also have advanced certifications, such as chartered financial analyst and certified risk analyst.

Credit analysts can be employed by a variety of financial inst𓂃itutions and credit a🍬gencies and in 2023 earned an average annual salary of $94,750.