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Credit Analysis Fundamentals

The document discusses the fundamentals of credit analysis including examining a borrower's financial profile, quantitative and qualitative analysis approaches, credit scoring models, the 5 C's of credit, loan-to-value and debt service coverage ratios, predicting default probability, and using credit reports and analysis tools.

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31 views12 pages

Credit Analysis Fundamentals

The document discusses the fundamentals of credit analysis including examining a borrower's financial profile, quantitative and qualitative analysis approaches, credit scoring models, the 5 C's of credit, loan-to-value and debt service coverage ratios, predicting default probability, and using credit reports and analysis tools.

Uploaded by

naghulk1
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Credit

Analysis
Unveiling the Essentials
(Mandar Mitra)
Introduction
Credit analysis is the art of evaluating
a borrower's ability to repay loans. In
this carousel, we delve into the
fundamentals of credit analysis.

1
The Borrower's
Profile
Credit analysis begins with a detailed examination of
the borrower's financial profile, including
income
expenses
credit history

2
Examining
Approaches
There are two main types: quantitative and
qualitative analysis.
Quantitative analysis focuses on numbers and
ratios.
The qualitative analysis considers less tangible
factors like management quality.

3
Credit Scoring
Models
Credit scores summarize a borrower's
creditworthiness.
FICO and VantageScore are popular credit
scoring models.
Higher scores reflect lower credit risk.

4
The 5 C's of Credit

Character, Capacity, Capital, Collateral,


Conditions
These five critical factors guide credit analysis.
Lenders assess the borrower's willingness, ability,
and financial stability.

5
Loan-to-Value Ratio
(LTV)

LTV calculates the value of a loan in relation to


the collateral.
A lower LTV ratio reduces the lender's risk.

6
Debt Service Coverage
Ratio (DSCR)

DSCR measures the ability to meet debt


obligations.
A ratio above 1 indicates the ability to cover debt
payments.

7
Default Probability
Understanding Risk

Credit analysis aims to predict default probability.


Higher risk equates to a higher interest rate.

8
Credit Reports, Credit
Bureaus and Analysis Tools
Credit reports from bureaus like Experian,
Equifax, TransUnion CIBIL, and CRIF
Highmark.
They provide a borrower's credit history, including
loans, payments, and credit inquiries.
Credit analysts use software tools to streamline
data processing.
Credit scoring, financial modeling, and risk
assessment software.

9
Conclusion.

Credit analysis isn't just for loan origination.


Continuous monitoring helps lenders manage
risk throughout the loan's life.

10
Keep Learning
&
andar!
Succeeding! M

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