Can AI tools help improve ones credit score?
Artificial Intelligence, or AI, is coming to be regarded as a panacea for many ills. Credit score is regarded as a financial lifeline in the modern world since a low score can diminish one's chance of securing a loan from a bank or NBFC. Can AI help one to improve credit score? Let's try to find out.
Kolkata: The credit score has almost turned out to be a virtually financial lifeline since without a sound credit score one does not stand a chance to clinch a loan in favourable terms and conditions. It means if one is burdened with a low credit score, it becomes impossible to get a loan, no matter whatever the exigencies. The moot question, does AI help one to improve one's credit score? Let's try to find out.
Credit scores help one to secure a loan. It is extremely useful to the lender since a look at one's credit score tells the lender whether the applicant is creditworthy, and if yes, to what degree. Let's take the example of CIBIL score. It is measured on a scale of 900. A score of 750 and above is considered good to excellent and score between 700 and 749 is considered good. If one has a score exceeding 750, it increases one's chances of getting a loan and credit card approvals with relatively lower interest rates. On the other hand, a score under 700 can make it harder to get loans or can get one for higher interest rates.
What follows below are a few generic rules that can help anyone to raise one's credit score. Usually is one encounters a tricky credit requirement, or situation, one is asked to consult a qualified personal finance adviser. However, one can try to use a generative AI tool to find a way out. here it must be mentioned that traditional AI automates processes, analyze data and makes predictions and analyses, while generative AI create new, realistic content and ideas that did not exist before.
If you face a situation which is not mentioned in the information of the credit information bureaus, one can use AI tools to help analyse the situation and what is the optimum way out of the situation.
Also, it might so happen that a customer has tried out all the standard means to raising one's credit score but there is no improvement and the credit score keeps lagging from the desired level. One can easily utilize a AI tool to find what can be done in such circumstances.
There are also situations where one is advised to adopt certain means but the user is not sure whether it can deliver the desired results. For example, if you are asked to surrender one credit card out of a few, but you are not sure that it could lead to a better credit management, you can explain the situation to an AI tool to check what could happen.
Analysts point out typical situations understand the use of AI tools. For example, an individual wants to launch a basic e-commerce business. But he has a credit score which is rather poor -- says 650 or below. Needless to say, no bank will be in a position to accommodate him with a credit card the terms and conditions of which will help him in the new business. There are certain standard rules like no letting dues pile up and paying them quickly and in full. Users are also asked to keep credit utilisation ratio below 30% to help raise credit score.
But if none of these really work, this person can seek the help of AI tools seeking tailormade advice. These tools will ask for information and check whether there are hidden patterns in the information. It will also conduct customised analysis using logic and knowledge before coming up with recommendations.
What Shriram Finance thinks
One of the leading NBFCs of the country Shriram Finance has listed a few ways in which AI credit scoring can be useful in the following ways:
AI-enabled systems can analyse alternative data sources such as social media activity and mobile phone data which traditional ways don't look into. The NBFC also says that "Financial analysis AI uses advanced algorithms to evaluate large datasets quickly and accurately. By assessing patterns and correlations within this data, AI systems can predict creditworthiness without relying solely on traditional credit scores. This technology enables lending institutions to predict loan default risks, assess behavioral trends."
Thus "AI technology broadens the scope of credit assessment, allowing lending institutions to evaluate individuals who previously fell outside traditional credit scoring models," says the NBFC.