How credit analysts turn data into decision-making

Brought to you by the Villanova School of Business

Credit is the fuel that keeps individuals moving forward with their goals in life and organizations growing over time. While providing access to credit is an important business strategy, permitting a consumer or business to borrow inevitably comes with risks for the lender. That’s why a variety of organizations employ credit analysts who are tasked with minimizing the dangers involved by investigating relevant data and financial statements.

A position as a credit analyst may be right for professionals interested in pursuing a career where they apply quantitative information to business problems. They can learn the necessary skills, strategies and software tools by earning a masters in analytics. If you think credit analysis might be the path for you, first get to know the demands of working in the field and how an advanced education can help.

What credit analysts do

The primary responsibility of a credit analyst is to determine the creditworthiness of an applicant and make recommendations to his or her employer accordingly. That can mean looking into the financial history of a business seeking a loan or an individual applying for a credit card. In either situation, the goal is to lower the chances of the organization losing money in a transaction, while establishing appropriate limits and interest rates.

Credit analysts may work for financial institutions, monetary authorities, brokerages, auto manufacturers or retailers, among other types of organizations. According to the Bureau of Labor Statistics, as of May 2016 institutions offering depository credit intermediation employed the highest number of credit analysts, but the greatest median salaries were in more specialized areas like securities and commodities contracts or natural gas distribution.

Depending on where they work, analysts may complete a variety of tasks on a daily basis. Some common duties include:

  • Examining financial data and statements in depth.
  • Reviewing customers’ credit histories.
  • Reporting on estimated credit risk of customers.
  • Studying developing trends in markets and the risks involved.
  • Evaluating credit applications and setting credit limits.
  • Recommending payment plans.
  • Completing loan applications.
  • Communicating with customers about transactions to resolve any complaints.
  • Updating financial information in customer files.

The skill set for credit analysis

An array of knowledge and skills come into play for credit analysts. To perform risk assessments, they must have a solid grasp of statistics and be familiar with accounting and finance techniques such as ratio analysis and financial statement analysis. In addition to managing spreadsheets and using various computer programs to investigate financial records, an analyst should be adept at communicating key findings to management in both written reports and oral presentations.

A familiarity with industry-specific concerns and methods is highly useful to credit analysts who work in the commercial sector. Professionals need to understand how a wide range of factors can impact risk. Keeping up on changes in the relevant markets allows them to take into account any trends or approaching challenges that might impact a particular loan.

How big data is changing credit decision-making

The rise of big data has transformed the way business is done across many industries. Some organizations have explored how analytics can improve their approach to assessing creditworthiness. With the latest tools and strategies, analysts have new visibility into opportunities and can project outcomes with greater accuracy.

Big-data techniques allow organizations to gather an unprecedented volume of information on patterns of spending and payment. This information allows analysts to predict dangers more effectively, but it can also point to fresh opportunities to extend credit. Gathering more varied findings allows experts to judge more effectively whether a consumer reliably pays bills, even if he or she has little or no history with traditional financial institutions.

An education in data-driven strategy

Preparing for the future of credit analysis means developing not only a deep grounding in statistics, calculus and accounting, but a broader understanding of how businesses and lenders operate. Professionals should prepare to put analytics concepts to work in looking at credit risks and industry trends, collecting relevant information from multiple sources, and anticipating problems ahead. Gaining that combination of technical ability and savvy perspective is where an analytics masters degree comes in.

Students working toward a Villanova School of Business Master of Science in Analytics have the chance to work with experts in the field, learning the robust tools and powerful techniques to gain valuable insights. They learn to construct data models, identify business intelligence and use structured analysis to answer real-world questions. Visit the program page to find out more and learn how you can apply.

Recommended Readings:   Sources:

https://www.bls.gov/oes/current/oes132041.htm

http://smallbusiness.chron.com/skills-credit-analyst-10842.html

https://www.investopedia.com/articles/financial-careers/09/career-credit-analysis-analyst.asp

https://www.ft.com/content/7933792e-a2e6-11e4-9c06-00144feab7de

https://www.mckinsey.com/business-functions/risk/our-insights/new-credit-risk-models-for-the-unbanked