What a time to be a credit analyst, right? Throughout the past year, emphasis on credit analysis and credit risk has never felt so important. With so many nuances and changes occurring in commercial credit analysis today, it's essential for those early in their credit analyst career to set a solid foundation to prepare for those changes. Strong credit analysis is critical to ensuring safe and sound lending practices, so it's essential that all credit analysts have a firm grasp on credit analysis best practices, from understanding and assigning credit risk to analyzing and making credit decisions.

Understanding Credit Risk

All financial institutions face three key areas of inherent risk: Interest rate risk, liquidity risk and credit risk. While these areas of risk can be closely correlated with one another, credit analysts are primarily focused on credit risk, which is the obligation to pay back depositors regardless of whether loans are repaid.