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How to Become a Credit Risk Manager

Career News June 7, 2014

A credit risk manager is the leader of the office and, according to a survey from Certified Compensation Professionals, pulls in over $109,000 annually. While there are several managers within a large lending institution, this office leader has the specific role of determining, and thus minimizing credit risk for the business.

The loan officers and supervisors are usually the ones who make the decision on who actually qualifies for a loan on an individual basis. However, the credit risk manager has the most complex role of shaping policy regarding credit risk and business control, and offering advice to the loan officers. He or she ensures the process, and policy, is conducive to managing credit risks.

Your Role

This manager also ensures that all policies are in compliance with state and federal regulations. Additionally, the corporate office itself decides what is proper and allowable; the credit risk manager will attempt to explain their wishes by implementing realistic strategies to reduce the risk. Whereas collections officers are hoping to produce cash flow, your job is to strategize ways to reduce bad credit borrowers, which leads to collections later.

Your managerial role involves studying multiple forms of data, while also analyzing demographics of borrowers and applicants. For example, there is the FICO score from Experian, Trans Union and Equifax, but this is just one part of the story.

You also learn how to understand income data, employment history and similar items that create a borrower’s profile. You then decide on how much credit is appropriate for this type of profile. Assume that a lot of your business will be in creating concrete rules of creditworthiness and conveying these lessons to your staff, since you’re involved with planning more than micromanaging each case. You determine if a borrower qualifies and whether they qualify for a traditional loan or a subprime loan.

The next step is in underwriting, and this requires knowledge of detailed financial records. You need to know a little bit about this process, although you will not necessarily do the work of an underwriter. When you advance to this position, you will set an example for others to follow, including managers under you. In the industry, this is called an algorithm, which is the criterion that determines credit risk. Lower level employees will use this information you have compiled to make logical decisions. Without your input, there is no “logic” to lending. You help the company build logical and profitable products.

Education and Work Experience Required

This job involves major responsibilities, and so most companies prefer to work with bachelor’s degree graduates, as well as workers with experience. You can come from a lending institution background, but obviously, managers with managerial training and experience on their resume are preferred. Still, many companies will promote their own loan officers and supervisors to this role after they have sufficient time to learn the business culture. Now is the time to take your career seriously and move up in the world!

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