If you've ever applied for a loan, you know it's not a matter of saying 'pretty please' and being granted the needed funds. You have to tell the lending agency how much you need, what you want the loan for and, most crucially, prove that you have the means to pay the loan back with interest. All of those disclosures are then handed over to a credit analyst to decide whether you're a worthy credit risk.
Every credit venture is a risk but credit analysts' educational background, scope of work and influence on clients' financial endeavours differs dramatically from those of the risk specialist. While these two finance professionals may work at the same concern, the work they do represents opposite sides of the same coin. One looks at the particulars of a single instance of credit while the other examines the entire financial context. That's why the requirements, salary and responsibilities for risk analysis are greater than for credit analysis. That begs these questions:
- how much education do you need to work as a credit analyst?
- Where do credit analysts work?
- What do credit analysts do?
- How much do credit analysts earn?
- What does it take to be a credit analyst?
Of all the jobs in finance, credit analysis is perhaps the lowest bar to clear. It has the narrowest scope of responsibility and the least dramatic consequences should a mistake be made. And yet, it has the potential to be steady, satisfying work. Let's discover all of its particulars.
What is a Credit Analyst?
A credit analyst assesses a borrower's creditworthiness. One of their main functions is scrutinising loan applicants' ability to pay back a proposed loan. They factor in how much the applicant earns and whether they have any other assets - a savings account, real estate, and any other types of investments. Those may include any financial instrument from life insurance policies to retirement accounts. They also look at the borrower's payment history. Have they ever been late? Have they ever defaulted on a loan?
Evaluating credit card usage is another function credit analysts fulfil. If you've ever seen a sudden hike in (or lowering of) your credit card's interest rate, had your card involuntarily blocked or received a raise on your credit card limit, you've experienced the fruits of a credit analyst's labours.
Credit analysts who work at credit rating agencies evaluate consumers' spending. They assign each credit account a 'grade' that the banks and lending institutions use to recommend approval or denial of a loan. However, unlike a budget analyst, whose job is to make sure clients' spending stays within the spenders' limits, credit analysts protect the lenders' interests by watching for borrowers who may default and those with a poor record of payment. You might say that one analyst makes the others' job easier.
Where do Credit Analysts Work?
This article's introduction presented one of the most common positions for credit risk analysts. They often work at banks and lending institutions, approving or denying individual loan applications. The criteria they use to decide in your favour (or not) are a combination of industry standards and best practices, rules particular to the lending house and the data you provide. For instance, if 67% of your income is already earmarked for other credit obligations, they will deem your debt-to-income ratio too high to approve the loan.
Credit analysts work in commercial banks as well. There, the focus is more on corporate lending. These analysts have a lot more client data to go over but their processes and function remain fundamentally the same. Based on a company's assets, liquidity and history of paying its bills, they may or may not grant the loan. By contrast, a corporate credit analyst's job is to keep the company from overextending itself - from borrowing too much or borrowing against anticipated profits. They might also manage the corporation's credit profile.
Credit card companies employ large crews of credit analysts. Their job consists of looking over cardholder accounts to weed out those who default on payments. If it's a lone late payment on an otherwise stellar record, they will recommend a mild course of action. Maybe raising the client's interest rate or increasing the monthly minimum payment. If a client maxes out their credit card, the credit analyst will flag that account for regular monitoring and recommend cancelling the card if the client falls into default.
How Can You Become a Credit Analyst?
Typically, any work in finance calls for at least a four-year degree in a maths-heavy subject. Some of the hottest jobs in finance expect applicants to engage in extracurricular learning as well. It's not unusual to see such job adverts specifying qualifications like Chartered Accountant credentials or a Masters in Business Administration (MBA) as a criterion for hiring. And, of course, years of experience in the field.
By contrast, school leavers could land a position as a credit analyst, provided their GCSEs (and A-Levels, if they sat them) earned high marks; particularly in maths. Naturally, you shouldn't count this news as a reason to skip out on higher education. Your chances at a bigger salary and greater upward mobility increase the more education you attain.
And you could take professional development courses to boost your chances of being hired. Certified Public Accountant (CPA) courses are open to all and you might even find Business courses to serve your aims well. Massive Open Online Courses (MOOC) offer many short-term classes in finance and management you could earn a certificate of training. Many of them are free or low-cost, and all of them let you learn at your own pace, to some degree.
What Skills Do You Need to be a Credit Analyst?
The educational requirements may be laxer for a credit analyst than, say, a financial planner - a finance professional who has a direct impact on their clients' financial health, but the skills and qualities needed to do the job are just as stringent. Credit analysts have to have above-average maths skills, decent communication skills and be conversant in office software, particularly databases and spreadsheets.
Analysts need excellent pattern recognition skills as well as the ability to focus on details. Let's say an analyst reviews a consumer's spending patterns and notices a sudden spike of credit card activity at points of sales (shops) the card owner doesn't typically frequent. Such activity might signal the card's been stolen, or it could simply be that they've started a new chapter in life. The card activity is important - not the speculation, so they would flag the account for closer monitoring. Conversely, if the amounts are far out of line from what the cardholder typically spends, a call to the customer might be warranted.
Perhaps more than any job in finance, credit analysts must operate with a strong sense of ethics. These professionals are privy to consumers' most sensitive data, including personally identifying information, how much they earn and how (and where) they spend their money. As incensed over our personal data usage by internet giants as we rightfully are, could you imagine the betrayal of trust a dishonest credit analyst could provoke?
Analysts cannot let their biases influence their credit decisions, either. They mustn't deny anyone credit simply because they don't like the person's name. Nor if they believe a certain type of person can't manage (or simply shouldn't manage) credit. And especially not if they think the borrower's income is too low for their tastes, even though that person's debt-to-income ratio falls within the loan approval range. Though not frequent occurrences, such instances have happened enough to be notable.
Your Salary as a Credit Analyst
How much you earn as a credit analyst depends on the type of business you work for, your level of education and responsibility - what you're entrusted with, and your geographical location. Analysts in London and Leeds have more work opportunities because those cities are England's financial hubs; they also tend to earn more than analysts in smaller locales. Likewise, analysts from a commercial bank will earn more than those working at a builder's society or regional bank.
Analysts with a university degree and continuing education certificates tend to out-earn colleagues who entered the field without such credentials, no matter where they are. Even as a school leaver who pursues continuing education, your wages might be lower than a colleague who spent four years at university. Furthermore, school leavers would likely be shut out of the more competitive analyst positions with commercial banks and investment management houses.
Keeping all that in mind, the average annual salary for credit analysts is £36,019, according to Payscale. Entry-level wages may not break £22,000 per year but the top end of that pay scale crests at £60,000 per annum. That's just a touch more than the average salary for finance brokers; the type who manage investment portfolios.
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