What Does a Credit Risk Analyst Do?
Credit risk analysis is one finance topic that the world learnt about during the global financial crisis, since it has ramifications for everyone looking to purchase a property, acquire a loan, or make an investment. A credit analyst examines and evaluates a person’s or company’s financial history to determine if they are a suitable candidate for a loan. Credit analysts, in other words, assess the risk of default to the bank or lender.
A credit analyst may not always provide a clear “yes or no” response to whether a person is a suitable candidate for a loan, but the research may lead to a “yes, but…” answer. Someone looking for a loan may be eligible, but only under certain circumstances, such as a higher or lower interest rate (depending on repayment history and credit score).Others may need a particular amount of collateral or certain conditions for qualifying, such as keeping their bank account balances above a certain threshold. Because there are so many factors involved in these determinations, credit analysts must have a specific degree of education and are compensated accordingly.
Education and Training
A credit analyst’s tasks include analyzing financial data such as balance sheets and income statements to estimate the amount of default risk and preparing a report for both the customer and the lender. This review involves computing financial ratios to assist the lender in making comparisons. Credit analysts must have a bachelor’s degree, preferably in finance, accounting, economics, or mathematics, to fulfill these obligations (notably statistics).1 Many credit analysts begin their careers in accounting, accounts receivable/payable, or loan application processing.
Credit Risk Analyst Salary
Credit analysts may work in a wide range of industries and locations. Many are employed by lending organizations such as banks or insurance firms. Furthermore, working as a bond analyst for an asset management or private equity firm, or for rating agencies such as Moody’s or Standard & Poor’s, judging the riskiness of investing in a business or nation, is in high demand. The compensation range for credit analysts reflects the abundance of possibilities. According to the Bureau of Labor Statistics, the yearly income for credit analysts is between $43,430 and $145,840, depending on experience, industry, and geographic region. 2
The table below from CareerExplorer.com shows the varying incomes depending on experience level. 3 Salaries rise in investment occupations and in urban regions such as New York City.
The top 10% of Credit Analysts in the United States earn:
The top 25% of Credit Analysts in the United States earn:
The middle 50% of Credit Analysts in the United States earn:
The bottom 25% of Credit Analysts in the United States earn:
The bottom 10% of Credit Analysts in the United States earn:
The Bottom Line
Credit risk analysts often operate in a high-pressure atmosphere where their research leads to a loan or investment decision. Analysts are appropriately rewarded for their belief in the analysis and ability to make informed decisions.
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