A career in credit analysis focuses on assessing the creditworthiness of individual or institutional loan applicants through quantitative analysis of their financial data. Credit analysts work for a wide variety of companies, from commercial banks and credit-rating agencies to retail operations and investment banks.

TUTORIAL: Financial Ratios

Obtaining a professional certification provides an additional level of expertise to professionals working in credit analysis and can help them distinguish themselves, improve their job prospects and increase their pay. Here, we describe five professional certifications available to individuals pursuing a career in credit analysis. (To learn more about this career path, read Analyzing A Career In Credit Analysis.)

Credit Risk Certification (CRC)
Credit risk certification is a professional designation that has been granted by the Risk Management Association since 2002. Credit risk management professionals work in the financial services industry, measuring and managing retail, commercial and corporate credit risk to improve financial stability for their clients.

Financial services professionals who work in the areas of credit risk, market risk and operational risk and who have at least five years of relevant work experience should consider CRC. Professionals who want to obtain the CRC designation must also become active members of the Risk Management Association and complete 45 units of continuing education activities, such as engaging in relevant courses and professional events, every three years.

Certification Requirements and Time and Money Investment
Certification requires applicants to pass the CRC exam. This exam covers seven broad areas of credit risk assessment, including accurately assessing a business's financial condition, the strength and quality of its cash flow, the value of its collateral and its sources for loan repayment. Applicants should be well-versed in financial statement and tax-return analysis, financial accounting and commercial credit. The RMA recommends 40 to 80 hours of study and a five-hour practice exam in order to pass the five-hour, 126 multiple-choice question CRC exam (128 on the Canadian exam). The exam is administered online during two testing windows, one in the spring and one in the fall, and each window is open for approximately two months.

The exam fee is $495 for RMA members and $695 for nonmembers. The practice exam costs $25 for members and $40 for nonmembers. There is also an optional web seminar that reviews test subject matter and offers test-taking strategies that costs RMA members $100 and nonmembers $150. Recertification, which is required every three years, costs $100, and applicants may want to purchase exam study materials. Required continuing education activities are also likely to cost money. Finally, RMA membership itself costs $250 a year for a professional membership. Thus, CRC certification has a minimum up-front cost of around $750 and ongoing costs of several hundred dollars a year. (For more, see Calculating (Small) Company Credit Risk.)

Professional Certificate in Credit
The New York Institute of Finance, a financial training company owned by Pearson, offers a professional certificate in credit. It requires individuals to take four core courses out of a possible 12 and two elective courses out of a possible seven. Courses cover topics such as credit risk analysis, financial statement analysis, cash flow and credit derivatives. The program offers day courses, evening courses and online courses. The price of each course varies wildly, from less than $100 to thousands of dollars. Completion of all courses within a three-year period is all it takes to earn this certificate. Instructor-led courses require 80% attendance to pass and online courses require a grade of at least 70% to pass.

Credit Business Associate (CBA)
The Credit Business Associate is a professional designation granted by the National Association of Credit Management (NACM). Accordingly, CBA professionals work in the credit management industry, and CBA certification indicates expert knowledge in basic financial accounting, business credit principles and introductory financial statement analysis. The CBA designation does not have a work experience requirement, which makes it an accessible option for individuals just starting a career in credit management. Instead, this designation requires an educational background that can be attained through college coursework, self-study or NACM coursework. The equivalent of a semester's worth of study is required in just three courses: Basic Financial Accounting, Financial Statement Analysis I, and Business Credit Principles. End-of-course certificates, official transcripts or grade reports are required to show satisfactory course completion with a grade of C or better. (For more about credit, see Corporate Bonds: An Introduction to Credit Risk.)

Certification Requirements and Time and Money Investment
In addition to meeting the education requirement, getting certified means passing the CBA exam, a three-hour exam consisting of 125-150 true/false and multiple-choice questions. The exam may also require applicants to prepare a balance sheet, an income statement, a statement of cash flows or a common size analysis. It is administered three times a year, in May, July and November and applicants must pass with a score of 70% or better. To study, the NACM recommends four specific textbooks on principles of business credit, accounting, financial statements and credit management; it also provides an outline of specific content to study. An optional, free, one-hour practice exam is available online at the NACM website.

The certification process also requires individuals to submit the CBA application, which mainly asks for information on the applicant's educational background, and to pay a fee of $225 for NACM members and $325 for nonmembers. The application fee covers the exam. Retakes are $55. Additionally, applicants must submit a professional resume, transcripts and an NACM Career Roadmap form (described in the following section). There is no continuing education requirement.

Other costs associated with becoming a CBA include tuition and fees to complete the required coursework and the cost to purchase course textbooks and exam study materials. There is also a fee of $175 for members or $275 for nonmembers to establish your personal file with the NACM-National Education Department.

Credit Business Fellow (CBF)
CBF is a professional designation that is also granted by the NACM to professionals working in credit management. It builds upon the CBA designation (which is required to earn the CBF designation) by adding further coursework and a work experience requirement.

CBF certification is an indicator of professional experience and expert knowledge in business law, credit law, financial statement interpretation and credit risk assessment. Credit management professionals who have earned at least 75 Career Roadmap points are eligible for CBF certification. (For more, see What is a Corporate Credit Rating?)

Certification Requirements and Time and Money Investment
Applicants must pass the CBF exam to become certified, but the NACM's National Education Board must first grant the applicant approval to take the exam. The three-hour exam covers business law, credit law, financial statement interpretation and credit risk assessment. It is administered three times a year, in May, July and November, and applicants must pass with a score of 70% or higher. The NACM recommends three specific textbooks covering the subjects that individuals should study to pass the exam. An optional, free, one-hour practice exam is available online at the NACM website.

The certification process also requires individuals to submit the CBF application, which is very basic because they should have previously completed the more detailed CBA application. The application and exam fee is $275 for NACM members and $425 for nonmembers. Retakes are $80.

Other costs associated with becoming a CBF include all the fees associated with first becoming a CBA, the tuition and fees to complete the required CBF coursework, and the cost to purchase CBF course textbooks and exam study materials.

Certified Credit Executive (CCE)
CCE is an executive-level professional designation granted by the NACM. It can be earned in one of four ways, each one requiring a specific amount of education or work experience. Plan A requires a four-year college degree, 10 years of professional credit management experience and 125 Career Roadmap points (see CBF section, above, for activities that earn points). Plan B requires the CBA and CBF designations, 125 Career Roadmap points and resume submission. Plan C requires 15 years of professional experience and 125 Career Roadmap points. It is only available to applicants age 57 or older. A fourth option allows individuals who have successfully completed the second year of the Graduate School of Credit and Financial Management program to take the exam. CCE certification is an indicator of professional experience and expert knowledge in accounting, finance, domestic and international credit concepts, management and law.

Certification Requirements and Time and Money Investment
Applicants must pass a four-hour CCE exam that the NACM says "measures a candidate's ability to apply concepts to situations or explain how they relate to the field of business credit." According to the NACM, each CCE exam can vary in length and scope, but it normally has two sections: one section with short answer and essay questions another section with a case study. Each section is worth 50 points and a score of at least 70% is required to pass the exam. The NACM recommends five specific textbooks covering the subjects that individuals should understand to pass the exam, which is administered three times a year (in May, July and November). The NACM does not have a CCE practice exam.

The certification process also requires individuals to submit a simple CCE application and pay an application and exam fee of $375 for NACM members and $525 for nonmembers. Furthermore, unlike the CBA and CBF designations, the CCE application requires recertification every three years until age 60 or until age 55 and official retirement. Recertification costs $150 and requires the completion of 30 hours of continuing education and participation in approved NACM and professional activities (which may entail additional expenses).

Other costs associated with acquiring and maintaining the CCE designation include the tuition and fees to complete the required coursework and the cost to purchase course textbooks and exam study materials. There is also a one-time fee of $175 for members or $275 for nonmembers to establish your personal file with the NACM-National Education Department, if you do not already have one. (For more, see A Brief History of Credit Rating Agencies.)

Conclusion
When deciding which designation to pursue or whether to pursue a designation at all, it's important to evaluate whether the time and money you must invest are likely to bring you returns in the form of a more robust career. Consider whether the educational requirements will benefit you and whether that designation is widely recognized and respected in your field. Also consider the level of work and achievement required to earn a particular designation and talk to more advanced professionals in your field to get an idea of which certifications might benefit you.



For more on this subject, read Financial Designations Aren't All Created Equal and The Alphabet Soup of Financial Certifications.


comments powered by Disqus
Trading Center