How Artificial Intelligence Will Affect Your Credit Scores
There’s been a rise in the talk on the topic online about the use of Artificial Intelligence. In fact, robots and artificial intelligence (AI) are expected to permeate our daily lives by 2025.
This could have huge effects on several business sectors, and we’re seeing it in healthcare, customer service and logistics. Already, AI is responsible for medical research breakthroughs and climate research, not to mention self-driving cars.
But, did you know Artificial intelligence (AI) is increasingly being used in the financial industry to assess creditworthiness of individuals?
AI and Credit Scoring
Artificial intelligence (AI) has been increasingly used in the financial industry, including credit scoring. Credit scores are used by lenders to assess the creditworthiness of a borrower, and they traditionally consider factors such as payment history, credit utilization, length of credit history, and types of credit.
However, with the help of AI, lenders AI can improve the accuracy and efficiency of credit scoring by analyzing vast amounts of data like a borrower’s social media activity, online shopping habits, and other digital footprints to determine their creditworthiness.
Even biometric data using facial recognition technology to verify an individual’s identity and assess their credit risk.
What about privacy and security?
While AI-based credit scoring has the potential to improve the accuracy and fairness of credit assessments, there are also concerns about bias and privacy.
If the AI algorithms are trained on biased data, they may perpetuate existing social and economic inequalities. For example, an AI system may inadvertently discriminate against minority groups or low-income individuals who have historically been underserved by the financial system.
Or they can use factors that are correlated with protected characteristics, such as race or gender.
Therefore, it is crucial to ensure that AI-powered credit scoring is fair, transparent, and accountable!
As AI-based credit scoring continues to evolve, it is important for regulators to address these concerns and ensure that the technology is used in a responsible and ethical manner.
Also, staying in the loop and learning more about the ever-changing credit scoring system will be important for every American. As technology evolves, so should our understanding of it and how those changes affect us and our finances.
Overall, the best way to start getting the credit you deserve is to learn more about your credit score.
We’re here to help you understand what your credit score means, and how you can improve it.