What is a credit risk analyst?

Credit risk is the risk of loss due to a debtor’s non-payment of a loan or other line of credit (either the principal or interest (coupon) or both).

Most lenders employ their own models (Credit scorecards) to rank potential and existing customers according to risk, and then apply appropriate strategies. With products such as unsecured personal loans or mortgages, lenders charge a higher price for higher risk customers and vice versa. With revolving products such as credit cards and overdrafts, risk is controlled through careful setting of credit limits. Some products also require security, most commonly in the form of property.

There are two very distinct forms of credit risk, and the type of role varies greatly between the two:

Retail Banking – Here credit risk is tied to decisions made in branches and call centres. It is a game of large numbers, using technology to assist in assessing a customer’s ability to fund a loan. A lot of this is done using credit risk systems developed by the banks to predict future behaviour, and a lot of data is supplied by third-party credit agencies, such as Experian and Equifax.

Investment and Corporate Banking – This is when companies are borrowing money (either directly from the bank or via the issue of a bond, which is a tradable form of loan), the sums can be very large indeed. Banks in this market employ credit risk analysts to establish that the companies to which they lend are likely to repay the loan and keep up interest payments. Again, external data is used – this time from third-party credit-rating agencies such as Standard & Poors and Moody’s.

Significant resources and sophisticated programs are used to analyze and manage risk.

If I work in credit risk what will I be doing?

If you work for a credit risk department your job is to assess the financial health of the banks customers, and extend credit (or not) accordingly. You may use in house programs to advise on avoiding, reducing and transferring risk. You will also use third party provided intelligence speaking to companies like Moody’s and Standard & Poor’s to provide you with such information for a fee.

Because there are many types of counterparties – from individuals to sovereign governments – and many different types of obligations – from auto loans to derivatives transactions – credit risk takes many forms. Institutions manage it in different ways.

Within credit risk, there is a whole range of potential jobs, including:

• Credit scoring;
• Credit analyst;
• Credit manager;
• Credit risk management;
• Credit controller;
• Collections manager;
• Debt collector.

These are very different types of job. For example, a credit assistant’s main occupation will be to take loan applications from frontline staff and credit-check the customer concerned. This involves collecting information from the customer via the sales person, checking the customer via a credit reference agency, and then running the information through the bank’s own credit approval system.

Credit analysts in the City work closely with corporate finance and with the dealing room, giving advice on a firm’s creditworthiness or the price of a bond. Sometimes — for example, when interest rates move or a currency suddenly fluctuates — the credit analysts will be under a lot of pressure to explain very quickly indeed to both the bank and its customers what the implications may be.

Credit analysts, will review information about the counterparty. This might include its balance sheet, income statement, recent trends in its industry, the current economic environment, etc. Based upon this analysis, you will assign the counterparty (or the specific obligation) a credit rating, which can be used for making credit decisions.

How do I get a graduate scheme / internship / entry level job or career in Credit Risk?

Obtaining a graduate scheme, internship or entry level role in credit risk can be very challenging and competitive – though very achievable by getting your application, CV, interview and general approach right. You can guarantee that ninety percent of applicants for credit riskroles will not know how to apply, so getting your application in the top ten percent makes things a lot more achievable.

Approaching the company in the right way will make all the difference. Combining the right approach with a strong interview (and in some cases assessment centre) writ a strong focused tailored CV will go a long way. Make sure you have gone through the free videos on this sight by entering your name and email address in the top right of this screen underneath the video. Once you have filled this in you will have instant access to everything you need to secure your career in credit risk.

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