What is a ‘credit analyst’
Credit analyst-a financial professional who has expertise in assessing the creditworthiness of securities to individuals or companies. Credit analysts determine the likelihood that the borrower can repay their financial obligations as a result of the review of the financial history of the borrower and his credit history and determine the economic conditions are favorable for repayment.
Credit analysts with expertise in analysis of financial statements and indicators to use when analyzing the financial history of a potential borrower. Credit analysts decide if the borrower has sufficient funds by comparing ratios with the industry standards and baseline data, other borrowers and historical trends. For example, a credit analyst at the Bank may test the company’s financial statements before approving a loan for a new warehouse.
Breaking down the ‘credit analyst’
Credit analysis is a specialised area of financial risk analysis. Credit analysts are also called credit risk analysts. Credit analyst evaluates the risk and determines the interest rate and the credit limit or the loan Terms for the borrower. Analysts use the research to make sure that the borrower receives a cheap loan and to help protect the lender from default.
Credit analysts work in credit unions, financial institutions, investment companies, foreign banks, investment banks, commercial banks, rating agencies, insurance companies and asset management. Credit analyst collects and analyzes financial data such as the purpose of the loan, payment history, liabilities, income, wages, assets and other information on the warning signs that may present financial risks. These data are used to recommend approval or denial or a loan or credit. The data also determines whether to increase or decrease your credit limit or charge you extra.
Credit analyst plays an important role in the overall welfare of the economy. Credit stimulates the economy and helps the economy to work on a daily basis. Credit analysts are to provide objective recommendations banks that will allow banks to offer loans, loans and lines of credit to individuals and legal entities for cars, homes, student loans, and business financing.
Ratings By Credit Analysts
Credit analysts can also issue credit scores. For individuals, the formation of a credit score is usually avtomatiziruete using algorithmic processes based on the credit history of the person, the behavior, bankruptcies, etc. – and is a three-digit number in the range of about 200-800. The most common type of individual credit score is Fair Isaac or FICO score.
For issuers of debt securities and instruments, such as bonds, credit analysts assign scores based on ratings, such as AAA, AA+ or BBB. Below a certain rating, debt called “junk” or below investment-grade bonds which typically carry higher yields for additional credit risk. A sovereign government can take credit ratings for its bonds. These credit analysts usually work in the credit-rating agencies such as Moody’s or “Standard & poor’s” (s&P). Insurance companies also evaluate their credit risk and financial strength rating agencies, such as I better.
A credit analyst can recommend a business loan or a business loan based on certain risk factors, such as economic changes, stock market volatility, legislative changes, environmental changes and regulatory compliance.
For example, if a business customer is struggling to pay employee wages and business expenses, it may be a sign of warning about the decline in revenue and potential bankruptcy, which may affect the Bank’s assets, revenues, rankings and reputation.
Financial data determines the level of risk in the loan, so the Bank can decide if they want to continue with approval. If the Bank decides to continue, credit analyst monitors the performance by the borrower and may issue recommendations about the termination of the credit agreement, if it becomes risky. This helps the banks to manage and balance the risks and income.
For example, a credit analyst can recommend a solution for the person who has unpaid credit card payments. The analyst may recommend a reduction in his credit limit, closing his account or new credit card.