Credit Research Analyst

What is a Credit Research Analyst?

A Credit Research Analyst is an individual who delves into the financial history of organizations or individuals to evaluate their creditworthiness. This is done to know the ability to repay the loan. You are expected to assess people or entities for their credibility.

As a credit analyst, your job is to safeguard companies lending loans to people or businesses with low financial credibility. This, in turn, will benefit the lender as every lender wants their money back with a premium.

Credit analysis is crucial in debt markets as various companies raise money from the debt market, therefore analyzing the market, understanding credit scores, and safeguarding money from becoming a bad debt.

Career Path for Credit Risk Analyst

To begin your journey as a credit analyst, you will need to follow a certain path that leads you to your final goal.

• Completing your bachelor's or undergraduate degree in accounting, finance, business analysis, or a relevant domain.
• Having experience in financial research or as a financial analyst could be your entry-level job.
• After 2-3 years of experience, you can apply for credit research roles, as you will have a wide variety of skills developed by that time.

Responsibilities of a Credit Research Analyst

Now that you have decided to pursue Credit Analysis, let's see how their average day is like:-

1. Establishing credit limits for specific industries based on data generated through research, company meetings, and clients' data. 
2. Preparing credit assessment reports for senior managers. 
3. Reviewing industry performance.
4. Analyzing financial reports and operations to assess risk. Discussing consolidated statements with management.
5. Conducting credit rating of borrowers. Compute credit limit and risk-adjusted return on capital (RAROC).
6. Check for compliance and due diligence of customers in consulting with general obligation.
7. Review property valuation reports while complying with valuation criteria.

Skills Required for Credit Research Analyst

Every job requires certain skills to excel and work efficiently. Below are a few skills that you may need to cultivate:-

1. Risk Assessment: As a Risk Analyst, your role involves foreseeing and evaluating potential future risks that could have negative impacts. Identifying all possible scenarios affecting the business is crucial for effective risk management.
2. Problem Solving: One of the crucial skills in this domain is the ability to address difficult situations. There might be a possibility that some of your clients might have certain issues that you may have to address. 
3. Attention to Detail: The foundation step in portfolio investigation requires meticulous attention. Given the critical and sensitive nature of financial data, working with utmost concentration and clarity is essential for efficiency.
4. Analytical skill: As an Analyst, the core nature of your job is to analyze complex data while reading a balance sheet, transaction history, and payment information. All of these will require you to analyze in-depth data. 

Educational Requirements and Salary Information

People who are willing to proceed with their career in credit research will be required to have a minimum of a Bachelor's degree major in finance/economics/statistics or accounting.

Considering the job market, you are expected to have your Masters's degree, too, preferably in finance. The most common certification is Chartered Financial Analyst (CFA).

Professional certifications that have become an industry benchmark for this role are Credit Risk Certification (CRC) and Credit Business Associate (CBA).

These certifications cover essential areas such as financial statement analysis, basic financial accounting, and business credit principles.

The Chartered Financial Analyst (CFA) certification deals with various financial analysis and investment management aspects.

Salary depends on multiple factors like the organization that you're working for, geographic location, qualifications, etc. The entry-level salary would be $37,054 annually or $16.88 per hour. This can go up to $126,101 per year.

Conclusion

Credit analysts play a pivotal role in assessing the creditworthiness of individuals or organizations, examining financial histories to determine their ability to repay loans.

By safeguarding lenders from potential bad debts, credit analysts contribute to the overall health of debt markets. The analysis involves assigning credit ratings, with higher ratings indicating a better chance of smooth loan processing.

The major skills required are analytical prowess, attention to detail, industry knowledge, risk-taker knowledge, and communication skills. All these skills and professional certifications will help you ease your journey as a Credit Research Analyst.

Researched & Authored by Siddhesh Khutwad | LinkedIn

Reviewed and edited by Parul Gupta | LinkedIn

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources:

• Credit Administration
• Credit Analysis
• Credit Analysis Basics
• Credit Analysis of a Company
• Credit Analysis Report