The future of finance is visioned with AI as it can help the lender understand the borrower’s risk more precisely. It can be done by analyzing the provided data, usually not included in a credit score. AI can also identify anticipated risks or whether the borrower is using too much credit.
Hence, future AI may be able to replace traditional credit scores. This facility enables underbanked individuals who don’t get access to a financial service. The benefit of the innovation is that it reduces the risk for the lenders and benefits the borrower. With AI development, many fintech companies are taking active steps to minimize the scoring bias. The main effect of the system is that the lower the number of bad credits, the more it increases the acceptance rate.
The innovations have both terrible and good effects on the credit scoring system. This article will guide on how AI effects credit score, but let’s begin to know how to check credit scores. In the future, AI systems might take the place of credit scores, but as of now, credit score still happens to be an essential element in getting a loan.
WHAT IS A CREDIT SCORE, AND HOW TO CHECK A CREDIT SCORE?
A credit score is essential to prove your creditworthiness to avail of a traditional loan. A credit score determines your creditworthiness, and it is necessary to get quick loans with lower interest rates. So you have to have a good credit report, as a credit score is influenced based on a credit report. You can get credit reports and credit scores through many free online resources. But, one important thing to remember is that you can check your annual credit report once a year, unlike your credit score.
Hence, If you are skeptical about your credit score and want to know your creditworthiness, then you can follow the steps mentioned below-
- First, You can log in to the official credit score website online.
- Then you can select under your preferences if you want to get the “annual credit score” report, then choose this option.
- Attach your ID proof.
- You should provide your PIN-code and DOB information with your number.
- After filling in all the details mentioned above, you can click “Continue” to proceed with the next step.
- You will receive an OTP on your phone as authentication proof — continue the verification process by entering the OTP.
- After enrolling, you will land on the website as you provide the ‘member login’ credentials. And hence, your credit score should be right on your screen.
The benefits of using AI.
One of the well-known problems of traditional scoring methods is their bias. Gaining the trust of a credit borrower is believed to have specific standards, and that’s when AI intelligence comes into work.
AI intelligence can analyze and process massive data sets, increasing the possibility of granting good credit. With AI-analyzed data, lenders can empower more borrowers to get credit and improve their overall credit reports. The AI-processed records help to determine trustworthy borrowers with lower risks and more data-based decisions.
The AI technology also helps to avoid any harmful fraudulent behavior that will help minimize the potential risks.
The demerits of using AI.
AI is an excellent innovation to avoid bias in providing your great aid. However, AI also affects certain controversies regarding privacy and legitimate data transparency. Every person has the right to know and have an explanation of their data, but sometimes various AI intelligence fails to provide that.
The biggest problem with the AI system is its inability to explain how to determine a borrower’s creditworthiness and choose who is reliable along with trustworthy.
Another demerit of an AI-powered solution is biased results. The AI intelligence primarily provides the final result based on the data provided to them. The data provided to AI is entered based on a person’s ideology, which is the main ingredient for biasness. Certified people determine the model’s data, which makes it prone to biased decisions.
Hence, if the data provided by AI is final, then the data scientists should be careful while selecting data. If the historical data is biased, the results are destined to be biased.
END NOTE
Artificial intelligence technology has advantages in making the credit scoring system more accurate through better assessment. This assessment aims to improve financial health for individuals facing underbanked conditions. However, AI might not be able to replace the credit score overnight, but it is definite that they have the potential to stand in the future.
To provide better performance, the developers must pay close attention to the quality of the data they use. The AL models should meet the requirement of accuracy as anticipated.
