# Credit Analyst Definition, Work, Required Skills, Job Prospects

## What Is a Credit Analyst?

The term "credit analyst" refers to a financial professional who assesses the creditworthiness of securities, individuals, or companies.

Credit analysts determine the likelihood that a borrower can repay their financial obligations. They review their financial and credit history and determine whether a subject's financial health and economic conditions are favorable for repayment.

These financial professionals generally have an academic background in finance, accounting, or a related field. They can find work at different types of financial institutions.  

### Key Takeaways

*   Credit analysts analyze companies' and individual borrowers' creditworthiness to determine the potential risk for investors and lenders.
*   They examine financial statements and use ratios when analyzing the financial history of a potential borrower.
*   Credit analysts are typically employed by commercial and investment banks, credit card issuing institutions, credit rating agencies, and investment companies.
*   Credit analysts are often called credit risk analysts because credit analysis is a specialized area of financial risk analysis.  
    
*   Debt issuers and their instruments are assigned scores represented by letter grades.

## How Credit Analysts Work

A credit analyst gathers and analyzes financial data associated with lending and credit products. This includes reviewing a borrower's [repayment](https://www.investopedia.com/terms/r/repayment.asp) history, along with [liabilities](https://www.investopedia.com/terms/l/liability.asp), earnings, and assets that they possess.

The analyst looks for indicators that the borrower might present a level of [risk](https://www.investopedia.com/terms/r/risk.asp). The data are used to recommend the approval or denial of credit and to determine whether to increase or reduce credit limits or charge additional fees.

### What They Analyze

A key component of their jobs is to interpret [financial statements](https://www.investopedia.com/terms/f/financial-statement-analysis.asp) and use ratios to analyze the fiduciary behavior and history of a potential borrower.

They decide whether the borrower has adequate cash flows by comparing ratios with industry data [benchmarks](https://www.investopedia.com/terms/b/benchmark.asp). For example, a credit analyst working at a bank may examine an agricultural company's financial statements before approving a loan for new farm equipment.

### Educational Background

Credit analysts are required to have a background in finance, economics, math, [accounting](https://www.investopedia.com/terms/a/accounting.asp), or other related field. Candidates with bachelor's degrees and experience are preferred, although a potential employer may overlook experience if someone has a graduate degree.

Some analysts also have [advanced certification](https://www.investopedia.com/articles/financialcareers/11/introduction-to-credit-analysis-certifications.asp), such as training offered through the National Association of Credit Analysts.

A variety of financial institutions employ credit analysts, including banks, investment companies, credit unions, credit rating agencies, insurance companies, and asset management companies. Those analysts who work in securities, commodities, and other investment areas earn the highest salaries.

### $94,750

The mean annual salary for a credit analyst in 2023. The highest in the U.S. was $142,370 in New York State.

## Special Considerations

Credit analysts are often called [credit risk analysts](https://www.investopedia.com/articles/personal-finance/011415/credit-risk-analyst-job-description.asp). That's because [credit analysis](https://www.investopedia.com/articles/financial-careers/09/career-credit-analysis-analyst.asp) is a specialized area of financial risk analysis.

Analysts evaluate the risk that investments hold and determine the [interest rate](https://www.investopedia.com/terms/i/interestrate.asp) and [credit limit](https://www.investopedia.com/terms/c/credit_limit.asp) or loan terms for a borrower. They use their research to ensure that the borrower receives an affordable loan and the lender is protected if the borrower defaults.

Analysts may recommend a business loan or business credit after considering certain risk factors. These factors may be environment-oriented, such as [economic](https://www.investopedia.com/terms/e/economic-conditions.asp) changes, [stock market](https://www.investopedia.com/terms/s/stockmarket.asp) fluctuations, legislative changes, and regulatory requirements.

If a business client struggles to meet payroll, it could be indicative of a decline in revenue and potential [bankruptcy](https://www.investopedia.com/terms/b/bankruptcy.asp), which may affect the bank’s assets, ratings, and reputation.

### Other Analyst Recommendations

Banks determine whether they want to approve certain loans by analyzing how much risk is involved in lending.

If a loan is approved, the credit analyst monitors the borrower's performance and may recommend terminating the agreement if it becomes risky. Determining the level of risk in a loan or [investment](https://www.investopedia.com/terms/i/investment.asp) helps banks manage risks and generate [revenue](https://www.investopedia.com/terms/r/revenue.asp).

For example, a credit analyst may recommend a solution for an individual who has [defaulted](https://www.investopedia.com/terms/d/default2.asp) on their [credit card](https://www.investopedia.com/terms/c/creditcard.asp) payments. The analyst may suggest reducing their credit limit, closing their account, or offering them a new credit card with a lower interest rate.

> **Important**
>
> Credit analysts play a key role in the well-being of the economy because credit stimulates financial activity. Access to credit provides consumers with additional spending power, which helps improve individuals' lifestyles and gives businesses temporary liquidity.

## Credit Analysts and Credit Ratings

Credit analysts may also issue [credit scores](https://www.investopedia.com/terms/c/credit_score.asp). A credit score is a three-digit number ranging from around 300 to 850.

The most common type of individual credit score is the [FICO score](https://www.investopedia.com/fico-credit-scores-explained-5072985). Credit score generation typically is automated for individuals using algorithmic processes based on their credit payment histories, spending, and past bankruptcies.

Scores for debt issuers and their instruments, such as bonds, are represented by letter grades. The highest is [AAA](https://www.investopedia.com/terms/a/aaa.asp), followed by AA+, BBB, and so on.

A company's debt is considered junk, or not investment grade, once it drops below a certain rating. These investments typically offer investors higher yields in exchange for the additional credit risk.

Insurance companies are rated on their credit risk and financial stability by rating agencies such as [AM Best](https://www.investopedia.com/terms/a/a-m-best.asp). The bonds of sovereign governments can also have credit scores. Credit analysts who assess bonds often work at credit rating agencies such as [Moody's](https://www.investopedia.com/terms/m/moodys.asp) or [Standard & Poor's (S&P)](https://www.investopedia.com/terms/s/sp.asp).  

## What Skills Do You Need To Be a Credit Analyst?

A credit analyst should have accounting skills, such as the ability to create and [analyze financial statements](https://www.investopedia.com/ask/answers/040315/how-should-i-analyze-companys-financial-statements.asp) and ledgers. Many credit analysts will have skills in risk analysis, mathematics, statistics, computing, and quantitative analysis. Credit analysts also should be good at problem-solving, have attention to detail, and have the ability to research and document their findings. They should be able to [understand and apply the terms](https://www.investopedia.com/articles/professionals/111115/common-interview-questions-credit-risk-analysts.asp) used in finance, banking, and business.

## How Do I Become a Credit Analyst?

A credit analyst usually needs a minimum of a bachelor's degree in finance, accounting, or a related field. A potential employer may look for completed courses in statistics, economics, financial statement analysis, and risk assessment. They may also require some previous on-the-job experience in accounting, banking, or finance.

Industry certifications can also help you land a job as a credit analyst or advance your career in the field. [Common certifications](https://www.investopedia.com/articles/financialcareers/11/introduction-to-credit-analysis-certifications.asp) for credit analysts include credit risk certification (CRC), credit business associate (CBA), credit business fellow (CBF), professional certificate in credit, and certified credit executive (CCE). Some credit analysts have [chartered financial analyst (CFA)](https://www.investopedia.com/terms/c/cfa.asp) or certified risk analyst (CRA) certifications.

## Is a Credit Analyst a Good Job?

Yes, a credit analyst can be a good job if you have an interest in accounting or finance, along with a desire to help companies and consumers make decisions regarding the extension of credit and the reduction of financial risk. According to the U.S. [Bureau of Labor Statistics (BLS)](https://www.investopedia.com/terms/b/bls.asp), the mean annual wage for credit analysts was $94,750 in 2023.

The top-paying industries for credit analysts are monetary authorities (central banks); securities, commodities, and financial investment companies; insurance carriers; and business support firms. The states with the highest employment levels for credit analysts are California, New York, Texas, Florida, and Illinois.

## The Bottom Line

A credit analyst is a financial professional who analyzes borrowers, companies, and securities to detect any potential risk of default.

They usually have educational backgrounds in finance, accounting, economics, or a related field. They may also have advanced certifications, such as chartered financial analyst and certified risk analyst.

Credit analysts can be employed by a variety of financial institutions and credit agencies and in 2023 earned an average annual salary of $94,750.

> **Article Sources**
>
> 1.  BigFuture. "[Credit Analysts: Tasks, Knowledge, Skills](https://bigfuture.collegeboard.org/careers/credit-analyst/tasks-knowledge-skills)."
>     
> 2.  U.S. Bureau of Labor Statistics. "[Occupational Employment and Wages, May 2023: 13-2041 Credit Analysts](https://www.bls.gov/oes/current/oes132041.htm)."
>     
> 3.  Federal Trade Commission, Consumer Advice. "[Credit Scores](https://consumer.ftc.gov/articles/credit-scores)."
>     
> 4.  Fidelity. "[Bond Ratings](https://www.fidelity.com/learning-center/investment-products/fixed-income-bonds/bond-ratings)."