Credit analyst operates for banks and financial institutions and work with customers to manage their credit history, credit score and decide whether or not and how much credit they are allowed for. Credit analyst uses computer programs and research financial records, and keep financial records up to date.
What is Credit Analysis?
Credit analysis is a type of analysis an investor or bond portfolio manager performs on companies or other debt resulting entities to regulate the entity’s capacity to reach its mortgage commitments. The credit analysis endeavours to distinguish the relevant level of oversight uncertainty correlated with investing in that appropriate entity.
Credit Analysis basically applies to study the credit-worthiness of a borrower it could be a large or a small firm or even an individual. For example, this kind of analysis could be expected by a bank when it requires to investigate whether a loan would be reimbursed by a borrower, or by a financial investor who wants to examine whether a corporation would honour the interest and principal repayment on bonds issued by it.
The process of Credit Analysis
- Firstly, credit analysts review the past records of the borrower, the market reputation or any negative news issue to evaluate the repayment capability.
- Next, in order to implement effective credit analysis, the analyst should necessarily be proficient at studying the financial statements of a firm and analyzing the ratios intimated by the statements.
- Further, the analyst also requires to check whether the borrower will have enough free cash flows to honour his responsibilities.
- And finally, the analyst applies statistical tools to indicate a risk rating to the borrower and also checks the amount of potential loss to the lender in the event of an error.
Job Profile of a Credit Analyst
Business Credit Analysts
- Evaluate risks in disbursing business loans.
- To manage an on-site evaluation of clients business and competitors.
- To study the assets and liabilities statements, profits and losses, and net sales.
- To assess the security of the client’s business based on the management activity, economic status, and potential growth.
- To approve loans for the client after adequate analysis of risks.
- To provide the documents related to disbursement of loans.
- To render a complete report of their findings to the bank.
- To guide the client through the application process.
Consumer Credit Analyst
- Analyze personal loan risks.
- Provide details to the ban
- Do a background check for financial status and compliance.
- Study credit history, assets and liabilities.
Opportunities for Credit Analyst
- Investment Banks
- Financial Institutions
- Insurance Companies
- Government Loan Divisions
- Credit Rating Agencies
- Fixed Income Domain
- Private Equity Firms
Skills Required to become a Credit Analyst
- Good mathematical skill
- Computing skills
- Adept at organizing, analyzing and reporting data
- Strong interpersonal skill
- Skill in working with details and numbers
- Interest in the market activity
- Good communication skill
- Problem-solving skill
- Good interviewing skills
Courses Required to become a Credit Analyst
1. Financial Modeling
It includes analyzing past data (including credit profile), levels of income and free cash flows over the past few accounting periods, extended financial situation progressing forward, studying ratios inferred from financial statements (in case of a firm) and even status of projects initiated (to determine whether the projects have been sound investments or not). The ultimate purpose of all this is the projection of the firm’s future financial status and, accordingly, the assignment of a credit rating, which will conclude the level of confidence investors have in the firm. View more.
2. Post Graduate Program Investment Banking & Capital Markets
This program, firstly, involves Financial Reporting Analysis which deals with understanding ratios from past financial reports. These ratios can then be benchmarked longitudinally or by industry standards to arrive at a relative fiscal position of the firm, and a credit rating can be given accordingly. The program also involves the valuation of firms and M&A Advisory, which can be a very important guide to the future of the corporate scenario in the country. Credit Research is also an integral part of the program’s syllabus. View more info on Post Graduate Program Investment Banking & Capital Markets.
Salary of a Credit Analyst
The average pay for a Credit Analyst is Rs 500,720 per year. The highest paying skills correlated with this job are Risk Management/Risk Control, Microsoft Excel, and Financial Analysis.