Starting Your Career in Credit Analysis: A Comprehensive Guide

Are you interested in a career in credit analysis? As businesses continue to grow, the need for sound financial management becomes more critical. The Covid-19 pandemic has impacted the industry, with credit analysts dealing with increased workload and uncertainty, although job security is not a major concern.

If you’re looking to start a career in credit analysis, here are some steps to help you get started.

Who is a Credit Analyst

Credit analysts spend most of their day putting together presentations that provide a detailed summary of loan terms and a financial analysis of the borrower, guarantors, property, and business. They also analyse existing loans, look at tax returns, calculate cash flow, and assist lenders with new loans. As analysts advance, they take on the role of a portfolio manager or lender, negotiate terms and establish credit theses, manage their own portfolio, review borrowers’ reporting, talk to sponsors and CFOs, and predict trends.

Credit analysis is a critical aspect of commercial banking that requires analyzing financial information, putting together presentations, and making credit decisions for lending.

Step 1: Get an Education in Finance or Accounting

Obtaining a degree in finance or accounting is not necessarily a requirement for becoming a credit analyst. For instance, you can acquire the necessary skills through self-study or start your career in the billing department of a bank before transitioning into credit analysis.

However, a degree in finance or accounting is a great foundation to start your career in credit analysis. It can help you gain knowledge of financial concepts and principles, financial statement analysis, and risk management. You can also consider pursuing a degree in business administration, economics, or a related field.

Step 2: Gain Work Experience

Having relevant work experience can significantly improve your job prospects in credit analysis. Consider seeking internships, entry-level jobs, or volunteer work to gain hands-on experience. You can also join finance clubs and participate in networking events to meet other professionals in the field.

Starting at a financial institution or credit rating agency can accelerate your career by providing more opportunities for promotion and recognition on your resume.

Step 3: Earn Professional Certifications

Certifications are an excellent way to demonstrate your commitment to the credit analysis profession and enhance your job-specific skill set. Some of the most in-demand credit analyst certifications recognised globally are:

1. The National Association of Credit Management (NACM) offers the Credit Business Associate (CBA) and Certified Credit Executive (CCE) qualifications, which are recognised globally.
2. The Association for Financial Professionals (AFP) offers the Certified Treasury Professional (CTP) qualification, which is recognised worldwide.
3. The Chartered Banker Institute offers the Chartered Banker qualification, which is recognised globally.

Step 4: Polish Your Credit Analysis Skills and Build Your Network

To excel in credit analysis, you need to have strong analytical, mathematical, and critical thinking skills. You can hone these skills by reading finance and accounting books and publications, taking online courses, attending seminars, and joining professional associations.

Networking is an essential part of any career, and credit analysis is no exception. Attend industry events, join professional organizations, and connect with professionals on social media to build your network.

Step 5: Find Your First Credit Analysis Job

Landing your first credit analysis job can be challenging, but with the right approach, you can succeed. Some things you can do to increase your chances of getting hired are:

Tailor your resume and cover letter to highlight your credit analysis skills and relevant work experience. Prepare for interviews by researching the company, practising common interview questions, and dressing professionally. Negotiate your salary based on market rates and your qualifications.

Credit Analysis Expected Credit Analyst Salary Range

According to PayScale, the median annual wage for credit analysts in the US is $60,416. The salary range for credit analysis professionals depends on various factors, such as experience, location, and industry. As you gain more experience and skills, you can expect to earn a higher salary.

What to Know Before Starting a Career in Credit Analytics

1. Career advancement opportunities are available for credit analysts to progress into portfolio managers and lenders. The timing of promotions depends on the industry and company. For example, a portfolio manager position may take roughly 6-8 years to attain, while a lender position may take an additional two years.
2. Credit analysts can transition to other positions within the industry, depending on the area of focus. For example, an analyst who underwrites loans for real estate may later transition to putting together proposals for real estate companies to send to potential financiers or banks.
3. Work-life balance is excellent in credit analysis and may be one of the best in Finance. However, workload and working hours may vary depending on the bank, sector, and stage of the deal. Some analysts work 50-60 hours per week.
4. Juniors in this field do a lot of modelling, which is a great way to get the basics of putting a cash flow statement together.
5. The level of customer contact varies depending on the organization and level. In small banks, analysts have more 1:1 customer contact, while in large organizations, analysts have less customer contact.
6. it is important to ask hiring managers about what qualifications are needed to be considered for a credit analyst position. Networking with alumni from one’s school or applying online for commercial credit analyst positions can also be helpful.
7. Writing ability is an essential skill for credit analysts as they have to explain the financial situation of clients, the collateral, or the loan proceeds.
8. Learning Excel is essential for credit analysts, especially PowerQuery and VBA. This will make one a valuable resource and attractive to other positions and automate some of the repetitive stuff. Large banks and super-regionals offer their training programs for new hires, so individuals should look out for those.
9. A career in credit analysis can lead to various opportunities like capital markets, portfolio management, or even sales management roles. It is essential to learn and grow continuously to advance the career and explore different paths.

Conclusion

Credit analysis is a perfect split for people who love the adrenaline of Mergers & Acquisitions and the intellectual stimulation of investment decision-making and convincing a credit committee.  Credit analysis offers exposure to a variety of industries and the opportunity to network with individuals from different areas within a bank, such as investment banking or treasury. With a starting salary that is relatively high and opportunities for growth in the future, credit analysis is an attractive career option.