What is a Credit Analyst Role?
A credit analyst role involves assessing the creditworthiness of an individual or company to determine the likelihood that they will honour their financial obligations. Credit analysts evaluate borrowers' past financial and credit history to determine their financial health and their ability to repay credit advanced to them by a lender. Typically, credit analysts are employed by credit rating agencies, credit card-issuing companies, commercial and investment banks, and investment companies.
Credit Analyst is arguably one of the most sought-after jobs in the finance industry. For many, it is their first step towards realising the dream of becoming an Investment Banker, and for others, it might just be their natural calling. Either way, the competition is fierce here, and hence, it is imperative to develop the right skill set to stay in the game.
A credit analyst researches the creditworthiness of an organization and gives an invaluable insight to the stakeholders who are planning an investment. These researches are driven by an array of socio-economic and financial parameters, requiring the Credit Analyst to have sound knowledge of the matter.
Below are the skills which are crucial not only for making it as a Credit Analyst but also, to make it big as one.
Given the quantitative nature of the field, Credit Analysts are expected to be proficient at accounting. Also, the fact that most Credit Analysts major in finance, statistics, and related fields doesn't make it any easier to survive without this skill.
Many non-finance significant analysts (mostly STEM majors) are often provided with on-the-job training on basic accounting techniques like ratio analysis, financial statement analysis and statistics.
A missing data point or an inconsistency in the data set can lead to devastating impacts on the analysis. Even worse, can mislead the entire project. Hence, paying considerable attention to minute details is a necessary skill for a Credit Analyst.
Being well versed with software/technology used in the finance
Microsoft Excel is the bread and butter of any finance professional. So, try learning not only the basic stuff like sorting, plotting financial models etc. but also, advanced concepts like pivot tables and VBA which will ease your analysis to a large extent. Excellent knowledge of Microsoft PowerPoint along with some other financial tools will also give you an edge. Again, many firms require their employees to undergo a full training program for this.
Knowledge of Industry
Being a credit analyst allows you to work for various industries such as healthcare, real estate, FMCG and many more. And needless to say, each sector has a different set of parameters to judge the creditworthiness of an organization and the value you bring to your firm. You need to develop a keen knowledge of finance in your industry as a credit analyst. An in-depth understanding of your industry will help a lot in identifying opportunities and risks.
An ability to multitask
Credit Analysis isn't exactly a forgiving profession when it comes to workload. Sometimes, a credit analyst is required to work on multiple projects at once from various clients. Hence, your multitasking, and more importantly, your prioritising skills come in handy here. You need to juggle between different deadlines and different demands and prioritise stuff according to urgency and expectations from the client.
Strong written and oral communication skills
A credit analyst must be able to convey his/her analysis lucidly via verbal or written means. They are almost always required to work in teams; hence, excellent communication skills are an absolute must.
Problem Solving aptitude
At the core of it, credit analysis is all about how well you satisfy the client's problem statements by using the resources in the most meticulous way possible. It sure is a position of great responsibility and demands an analytical mind, strong knowledge of relevant fields, and most of all, a problem-solving attitude.
Ability to handle stress
This profession can stress you to your limits at times and the immense responsibilities associated with it don't make it any easier. Risk assessment is a demanding and time-consuming process that requires you to juggle between tasks almost daily. Not everyone is a cut out for this job.
The above might seem overwhelming at first glance, however, being a Credit Analyst is never easy, it never was. Nonetheless, a successful stint as one might be your first step into an advantageous line of career. Also, keep in mind, that the above was just a list of general skills you need to develop as a Credit Analyst. The "real" skills would come to you only after you have experienced them as a professional yourself.
Top Credit Analyst Interview Questions and Answers
Credit analysts facilitate credit risk management by measuring the creditworthiness of the individual or a firm. Credit analysts are generally employed by banks, credit card companies, rating agencies, and investment companies.
Below are our top credit analyst interview questions.
Q1) What is Credit Analysis?
Q2) Explain the process of Credit Analysis?
Q3) What are the 5 Cs of Credit Analysis?
Q4) What do you mean by interest coverage ratio?
Q5) What do credit rating agencies do?