A credit analyst and underwriter both have a very crucial role to play in an organisation. Let us look at the responsibilities of each in details to have a better understanding as to what both of these roles entail and how do they differ.
Who is a Credit Analyst?
The primary function of banks and financial institutions in the capitalist economy is to help channels funds in the economy efficiently. They help provide funds to those in need of money and also deposit additional funds saved by people by offering them an interest in their overall deposit. While providing loans to borrowers banks and other financial institutions have to assess the profile of the candidate who is seeking the loan. This assessment is necessary to evaluate the repayment capacity of the borrower.
The assessment is needed to find out the risk associated with providing the loan to a particular borrower. Lending institutions have to reduce their risk exposure and they like to evaluate the borrower’s financial and personal information to find out whether the risk associated with loaning the amount is in the acceptable range. Various important information including the borrower’s income source, credit history, monthly income, repayment capacity, etc. are analysed thoroughly before coming to the final decision of approving or denying the loans request.
Credit analysts play a crucial role by evaluating the risk factors associated with the borrower. They are responsible for collecting and analysing all the financial and personal records of the borrower to find out whether it’s an acceptable risk for the lending institution or not. Credit analysts work in various types of establishments including banks, financial institutions, insurance companies, credit agencies, investment banks, etc.
What Does a Credit Underwriter Do?
A credit underwriter is responsible for reviewing and scrutinising new loan applications to find out suitable borrowers who can be trusted to repay the loan amount as per the terms and conditions of the lending institution. Underwriters are responsible for identifying and providing suitable borrowers. Underwriters are primarily responsible for figuring out commercial and personal loan eligibility. Underwriters work side by side with the loan officer and clients from the start till the loan is disbursed. They analyse and overview the loan documentation process. Underwriters use the ‘4Cs’ method while reviewing credit applications that include Character, Capacity, Conditions & Collateral.
How do they differ?
The role of a credit analyst and underwriter might not seem very different at first glance but both are responsible for performing different functions. These functions are related to the loan application process but it differs when you get into the details of work done by both types of professionals. One of the major differences between a credit analyst and a credit underwriter is that an analyst is responsible for analysing and identifying the risks associated with loaning the funds whereas an underwriter is responsible for analysing the documents provided by the client for loan approval.
The role of a credit analyst is a little broad as it involves conducting risk analysis to see if the borrower’s profile is a suitable fit by analysing all associated risk factors. The role of an underwriter is however limited to inspecting the documents provided by the client to figure out if they have all necessary documents needed by the lending party. Another major difference between a credit analyst and an underwriter is that an underwriter works closely with both the loan officer and the client throughout the loan process whereas the credit analyst works behind the scenes to assess the borrower’s financials.
Credit risk analysts are in high demand given the importance of risk management in the financial services industry. Credit risk analyst is also among one of the most sought-after career options for the people aspiring to be successful in the financial services industry. One can easily opt for a credit risk analyst course by reputed institutions like Imarticus Learning who also provide job guarantee with some of the top firms in the industry.
Also Read: How Do I Become Credit Risk Analyst