Credit scoring is a big deal for everyone involved in the financial world. It allows lenders to make smart decisions about lending money and helps borrowers get the loans they need.
For lenders, credit scoring can be called a kind of compass when they decide whether to lend money to someone. Imagine, they can take a snapshot of the person's credit history to understand how risky it might be to lend to the person.
Great news for borrowers too! A fantastic credit score can open doors for them when it comes to getting a loan. They are not only more likely to be approved but could also get a better interest rate!
AI-based credit scoring is fairer. It eliminates bias, saves lenders from arbitrary changes in human judgment and reduces dependency of businesses on people.
Speaking of businesses, credit scoring is like an army knife! By having all the info they need to make smart decisions about loan approvals, they can keep risk low, become more efficient and focus on growing their customer base by freeing resources previously used to analyze loan applications.
All in all, credit scoring is a win-win strategy for everybody. Like a belt, it helps keep the entire financial industry in good shape.
Does such an amazing system have drawbacks? Sure, it does.
Traditional credit scoring methods can be a real drag! Why?
They’re biased. Designing a set of rules for giving out loans is a challenging task, and when humans bring their ideas and judgment into it, biases become inevitable. Biases lead to wrong conclusions, and ultimately business starts giving loans to bad lenders and ignores some good applicants too. Ultimately, it costs businesses money and opportunities to grow.
Another major drawback of traditional credit scoring is speed. Manual loan approval processes require teams of up to hundreds of people, and enormous costs associated with it. Moreover, manual approval isn’t fast, so your business loses time before the loan is given out. As you can see, traditional credit scoring models slow down the loan approval process and lead to mistakes when deciding who gets the credit.
Also, traditional credit scoring methods are a bit outdated, like using a flip phone in the age of smartphones. It sounds so weird, right? Just like this, traditional credit scoring methods might rely on information that's not up-to-date, and miss out on important new sources of data that could give lenders a better understanding of someone's creditworthiness. This can make it challenging for businesses to keep up with all the latest developments in the ever-changing financial industry.
Are there any other issues to be mentioned? Sadly, there are.
Imagine you own lending businesses that need to deal with vast amounts of data. Is it challenging? Yes. Credit scoring requires so much information, so you need to have an effective system in place to keep everything in order and easy to understand.
Increased costs are probably one of the biggest concerns for businesses, especially when it comes to the lending process. Challenges with credit scoring can lead to inefficiencies and potentially incorrect credit decisions, which can result in missed opportunities and higher costs. And this is not what was originally expected.
Staying up-to-date with the latest laws and regulations is another daunting task. After all, it is almost impossible to keep track of everything.
Finally, the latest, but one of the most important challenges to overcome is keeping a competitive edge. Actually, this issue is relevant for each sphere, as victory goes to the strongest. The credit industry is a really booming field, so the task for companies is to adapt quickly to respond to changing customer needs.
Breathe out. We have good news. There are progressive ways of coping with these issues! And here is where AI comes into play.
AI-powered credit scoring system is a safety belt that solves these problems. What is it actually doing? Believe it or not, the AI system works much more effectively than a whole team: it analyzes thousands of loan applications in real time and provides more accurate and efficient credit decisions, which can benefit both the lender and the borrower. AI-powered credit scoring systems can provide lenders with new and valuable insights into a person's creditworthiness, which can help them to make even more informed decisions about loan approvals.
We at Tensorway developed different additional ways to make use of credit scoring: not only our models calculate credit score, they also estimate the probability of loan default, and make loan counter-offers on better conditions. Our systems constantly assess already-existing loans during their repayment period and propose ways to restructure a loan even before a client officially admits there are repayment problems. Our system may suggest offering loans on great conditions for clients with great credit history, which will increase revenue of your organization and reduce operational risks.
So, business owners, have you considered adding some AI magic to your credit scoring process? It isn't only super cool, but also comes with a whole bunch of benefits!
Say goodbye to tedious manual work and hello to increased efficiency! By automating your credit assessment process, you'll be able to save time and avoid any pesky manual errors. What is the result? Faster loan approvals and happy customers. Sounds exciting, right?
The other benefit you may expect is getting accurate credit decisions! By using AI-powered credit scoring systems, you'll be able to analyze a ton of data in real-time and make smarter, more consistent decisions. And what is the best part? No more costly mistakes and reduced risk of loan defaults.
A really valuable benefit is that AI systems can easily spot patterns and anomalies, helping you reduce the risk of fraud and other shady activities. So, allow AI to be your guardian angel! And keep your business safe and sound with its power.
By using AI-powered credit scoring systems, you'll gain access to tons of valuable insights into your customer's creditworthiness. This means you can make super-informed decisions and even better understand their financial needs and preferences. Yay for new opportunities! Just reach out to our team to discuss what we can do about it.
And you are probably eager to know whether AI-powered credit scoring can give you a competitive advantage. The answer is yes. With a system like this in place, you'll be able to offer lightning-fast and super-accurate loan approvals, giving you a major competitive edge. So, say goodbye to the struggle and hello to success!
At Tensorway, our development process is focused on creating AI-based credit scoring solutions for businesses that are easy to use, intuitive, and highly effective.
Our AI system uses advanced algorithms and machine learning to analyze tons of data in real-time and give super-accurate predictions about a person's creditworthiness. Want to know how it works? Let us break it down.
- Step one is the data collection and it's time to gather all the juicy details! Here we get a complete picture of the individual or entity being evaluated. That's why we collect a variety of information, such as credit history, income, employment details, payment history, and more financial info.
- During the second step, it’s time to tidy up all the information collected. We remove any irrelevant, missing, or duplicated data and give it a good clean. Then it’s necessary to transform and normalize the data so it's ready to be used by our AI magic-maker.
- The fun part is next! We're going to teach the AI model to do its job using the cleaned-up data. It's all about finding patterns and connections in the data that'll help us guess someone's credit score. To do this, we'll show the AI lots of examples and give it some hints to make it better and better at guessing. It'll be a learning experience for both of us!
- Now it's time to see how our model did! We'll put it through some tough tests to make sure it's doing a great job and giving us trustworthy results. This includes trying it out on fresh data and comparing its predictions to real credit scores. It's like a pop quiz to make sure it's ready for the big leagues!
- Finally, it’s the moment we've been waiting for! Our model has passed the tests with flying colors and now it's time to put it to work. We'll get it up and running and let it help us make smart decisions about people's credit. It'll be analyzing information in real time and giving us its best guess on their creditworthiness. Isn't that cool?
A major problem of credit scoring systems is that such models lose their predictive power with time. The Economic situation changes, people need different loans, and your business starts focusing on new credit products. For automatically detecting such situations, we developed automatic tools that allow us to control whether new data is significantly different from historical data on which our model was trained on. This allows us to understand when our system needs to be retrained, a process which we also fully automated.
Our AI system is like a student who never stops learning! We make sure it's always up-to-date and as accurate as possible by continuously refining and improving it. By regularly updating and retraining the model, it stays ahead of the curve and is ready to tackle whatever the market throws.
So, if you are dreaming to improve your credit scoring process with AI solutions you know what to do. Just share your thoughts and be ready for trying new credit scoring methods.
Unstructured data refers to information that does not adhere to a predefined data model or is not organized in a pre-defined manner.
Predictive analytics in AI refers to the use of statistical models and ML techniques to analyze data and make predictions about future outcomes.
Black-Box AI refers to sophisticated AI systems whose decision-making processes are not transparent or interpretable to users or developers.