What Does a Credit Risk Analyst Do?

One finance field that the world learned about during the global financial crisis is credit risk analysis, as it has implications for every person wanting to buy a house, get a loan, or make an investment. A credit analyst reviews and assesses the financial history of a person or company to determine if they are a good candidate for a loan. In other words, credit analysts determine the risk of default to the bank or lender.

Many times a credit analyst does not just provide a simple “yes or no” answer to whether an individual is a good candidate for a loan, but the analysis may lead to a “yes, but …” answer. Someone seeking a loan may qualify for the loan, but with specific conditions, such as a higher or lower interest rate (depending on repayment history and credit score). Others may have a specified level of collateral or certain contingencies to their qualification, such as requiring that their bank account balances do not fall below a certain level. Because there are many variables involved with these decisions, credit analysts are required to have a certain level of education, and for that, they receive commensurate compensation.

Education and Training

The responsibilities of a credit analyst include evaluation of financial data, such as balance sheets and income statements to determine the level of default risk, and preparation of a report for both the client and the lender. This evaluation includes calculating certain financial ratios to help the lender make comparisons. These responsibilities necessitate that credit analysts receive at least a bachelor’s degree, ideally in finance, accounting, economics, or mathematics (notably statistics). Many credit analysts’ initial work experiences are in the areas of accounting, accounts receivables/payables, or loan application processing.

Credit Risk Analyst Salary

Credit analysts can work in a variety of fields and locales. Many work for lending institutions like banks or insurance companies. Additionally, there is a great demand in the investment industry, working for an asset manager or private equity firm as a bond analyst or for rating agencies like Moody’s or Standard & Poor's, determining the riskiness of investing in a company or country. The salary range that credit analysts receive reflects the plethora of opportunities. According to the Bureau of Labor Statistics, the annual salary for credit analysts is broad and ranges between $43,430 and $145,840 and is dependent upon the level of experience, type of industry, and geographic location.

The following chart from CareerExplorer.com details the various salaries based on experience levels. These salaries increase for investment jobs and those in metropolitan areas like New York City.


Highest


The top 10% of Credit Analysts in the United States earn:



$112,328



Senior


The top 25% of Credit Analysts in the United States earn:



$78,690



Experienced


The middle 50% of Credit Analysts in the United States earn:



$58,657



Junior


The bottom 25% of Credit Analysts in the United States earn:



$43,159



Starting


The bottom 10% of Credit Analysts in the United States earn:



$34,834


The Bottom Line

Credit risk analysts typically work in a pressured environment where their research leads to a decision to grant a loan or to make an investment. It takes a certain confidence to have conviction in the analysis and make a sound decision, and analysts are duly compensated.