7 Top Duties and Responsibilities of a Credit Analyst

Credit analysts are a rare breed of finance professionals. They are exceptionally skilled at financial analysis. They deeply understand how the markets work. Proficient in maths, with a sharp eye for details and a passion for helping people achieve their financial goals, it is easy to understand why credit analysts are in high demand in the finance industry. They have to perform a balancing act that ensures a thriving economy while safeguarding the interests of the money-lending companies. Credit analysts are hired by commercial banks, investment firms, credit rating agencies and NBFCs to help them make informed decisions on loan applications.

If you are a CFA student or hoping to become one, a credit analyst is a potential career. It is a rewarding profession that can lead to many exciting opportunities in the future. You can work with leading financial companies, get promoted to leadership positions and earn lucrative salaries. Sounds good, doesn’t it? However, like every financial job, a credit analyst’s duties and responsibilities require a high level of skill and expertise. Want to know what they are?

A look into a credit analyst’s duties and responsibilities

1. Assessing credit risk

Without credit analysts, credit is a house of cards. One small nudge and the whole economy can collapse. Analysts are trained to monitor, evaluate and analyse the financial capacity and worth of every potential borrower. Companies that seek commercial loans are put under the microscope. Credit experts assess their financial statements, revenue, loss, transactions and previous credit history. No small detail goes unnoticed. Once all the documents have been scanned, the credit analyst can confirm a client’s creditworthiness. Are they in a good position to pay back the loan? Will they default on payments? Is there enough collateral? One of the main duties and responsibilities of credit analysts is to answer all these questions accurately.

Credit analysts also assess the risk factors when issuing credit cards to customers to ensure they can make payments.

2. Financial data analysis

When a person or company applies for credit, it is up to the analyst to determine whether the potential borrower has the means to fulfil all loan conditions. This kicks off a series of processes. First, the professional will evaluate the credit application, by registering the given details. For businesses, you perform a cash flow analysis to identify risk factors. You can also use financial ratios to determine the fiscal health of the company. A background check or credit history review is required to notice any red flags. A credit analyst’s duties and responsibilities include a thorough analysis of financial data as it can help to approve or reject a credit application.

3. Determining or reviewing credit limits

A credit analyst’s duties and responsibilities also involve establishing credit limits for new and existing customers. Credit limits are the maximum amount of money you can borrow on your card or line of credit. Analysts will examine the borrower’s previous repayments, income and credit defaults, if any. If their financial situation is stable and they can maintain their payments, the credit analyst will vote in favour of extending or granting the credit limit.

Also Read – Credit Analyst Jobs: Top Companies Hiring, Roles, Salaries & More

4. Conducting due diligence

The finance industry must follow a detailed legal framework as decided by the country’s laws and regulations. Credit analysts ensure protocol is followed during the loan application process. When reviewing the financial history or current transactions, the customers’ paperwork should be in compliance with the law. Due diligence is high on the list of a credit analyst’s duties and responsibilities.

5. Offering financial recommendations

After credit analysts are done with research and due diligence, they compile their findings into a financial report. This is presented to the manager or team leader. The analysts will make recommendations to help the company make critical decisions on the loan application. Of all the credit analyst’s duties and responsibilities, this one is crucial as it requires a complete financial evaluation and risk management. It helps the company to make an informed decision on the loan application.

6. Apply the 5 Cs of credit

An efficient credit analyst knows how to use the 5Cs of credit to determine a customer’s creditworthiness. These 5Cs are character, capacity, capital, collateral and conditions. Each parameter is important as it helps to evaluate the financial condition of the loan applicant, their credit history and ability to make timely payments.

7. Analysing and creating loan terms

Another relevant part of a credit analyst’s duties and responsibilities is to set the terms for the loan. After carefully studying the applicant’s financial information, the analyst must evaluate the risks involved. Only then can the loan terms be decided. The credit analyst can recommend whether to modify, increase or shut down the line of credit.

Also Read – What are the various skills required to become a Credit Analyst

Top skills of a credit analyst

Every financial professional must be proficient in certain skills that help them get the job done. A credit analyst’s duties and responsibilities largely depended on his abilities and expertise.

1. Analytical and quantitative skills

You must dig deep into financial data, understand balance sheets and financial statements, and apply ratios and analytics in various situations. This requires deep analytical thinking to achieve the desired results.

2. Attention to detail

It is one of the credit analyst’s duties and responsibilities to investigate every single detail listed in an application. You have to analyse all the points on a balance sheet, look closely into the client’s background and perform due diligence. Any errors, irregularities or risk factors that affect the borrower’s ability to make payments must be reported to the senior managers.

3. Communication skills

The credit team will hold several meetings with upper management or business managers to discuss their research findings. A credit analyst’s duties and responsibilities also include creating detailed reports and making presentations. This will require excellent written and oral communication skills. So ensure you practice and perfect your communicative abilities.

4. Proficient in financial software

MS Excel, statistical software and financial modelling are some tools that can help a credit analyst’s duties and responsibilities.

Also Read – How to Become a Credit Analyst and How it Stands Out?

Why Proschool’s CFA course is ideal for credit analysts

The CFA course is globally recognised as one of the top finance certifications. Many leading financial companies and banks prefer to hire CFA professionals for various job profiles, including credit analysts. The course has a special focus on credit analysis and risk management.

IMS Proschool is the best institute for CFA. You learn about various relevant concepts, skills and industry knowledge, such as a credit analyst’s duties and responsibilities. The syllabus is taught by expert finance professionals with high levels of experience. The professors use innovative learning methods, hands-on training approaches and real-world projects to help students master the subjects.

Why Proschool is best for CFA:

• You can study for the CFA at multiple coaching centres across India in cities such as Mumbai, Chennai, New Delhi, Pune, Kolkata and Bangalore.
• Students unable to study at a learning centre can register for online classes.
• To help you learn the syllabus, professors offer customised study plans, doubt-clearing sessions and mentorship to all students.
• There is a one-month online foundation module for students without a finance background.
• Students are given a clear understanding of a credit analyst’s duties and responsibilities.
• At Proschool, you can access over 2,000 practice papers, mock tests and learning videos.
• An established placement program is available to all certified students.

Conclusion

If you’ve stayed on the page, you are now familiar with a credit analyst’s duties and responsibilities. This position is a challenging and engaging job profile, in which you have to use your keen analytical skills and technical knowledge to the test. Many credit analysts have moved up the corporate ladder to become managers, directors and vice presidents. Some even move to other fields such as corporate finance, sales or portfolio management. Safe to say, if you become a credit analyst, there is a world of exciting opportunities waiting for you.

FAQs

Are credit analysts in high demand?

Credit is an important resource that fuels the economy, but banks and financial companies have to be careful and smart when lending money to businesses and individuals. A credit analyst’s duties and responsibilities include performing due diligence and assessing a customer’s creditworthiness. This helps money-lending companies to approve or reject applications and creates a high demand for credit analysts.

How can I become a credit analyst?

Credit analysts can have one or more of the following credentials:

• Commerce or financial accounting graduate
• Masters in commerce
• Chartered Accountant
• MBA in finance
• FRM
• CFA

Are CFA holders the preferred choice for credit analyst roles?

The CFA syllabus includes valuable information about the credit business, international finance markets and relevant industry skills. This is why some companies, especially MNCs, prefer CFA professionals.

What does a credit analyst do on a day-to-day basis?

Here below are some of a credit analyst’s duties and responsibilities on a daily basis:

• Research various financial information
• Analyse and verify financial statements and loan applications for accuracy.
• Multitasking on two or more cases at a time.
• Meet with clients, senior management, and team members to discuss reports.
• Conduct due diligence on the client’s financial data.
• Make recommendations on whether to approve various loan applications.