How AI is Changing Credit Score Management

Managing your credit score has always felt like a bit of a mystery. You make payments, check your report, and hope for the best. However, figuring out exactly what affects your score and how to improve it isn’t always clear. This is where AI comes in to save the day.

AI is making credit scoring smarter, more personalised, and way more transparent for both individuals and financial institutions. With things like real-time credit monitoring and better risk assessments, AI is giving you control of your credit health.

On how many levels is AI changing the game in managing credit scores? We’ve gathered the 3 main ways and we’re ready to share them with you. Let’s get right to it. 

What is credit score management?

Before we talk about AI, let’s understand what credit score management is all about. Essentially, it’s the process of tracking, maintaining, and improving your credit score to make sure you have better financial opportunities in the future.

With a high credit score, you can be more financially secure and enjoy bigger limits on loans, lower interest rates, and more. 

To manage your credit score efficiently, you’ll need to:

• Keep an eye out for errors and modifications to your credit record
• Make your bill payments on time to have a positive payment history
• Control your debt levels to keep up a low level of credit utilisation
• Maintaining your old accounts and staying away from needless credit applications

How AI works in credit score management

Credit score management has historically depended on manual tracking, financial self-control, and recurring credit report checks. With the introduction of AI, this process is changing, making it easier for both people and organisations to make better financial decisions through automation, real-time tracking, and predictions.

This market isn’t too new, but it’s growing at great speeds with a projected 25.9% CAGR during 2024-2031.

AI is known for a couple of its best features – data processing, automation, personalisation, etc. Within credit score management, these are still the features that bring the most value. 

The gist is – AI takes the guesswork out of credit score management for both consumers and financial institutions. 

3 ways AI is changing credit score management

It’s no secret that AI is turning everything it touches into gold. From smarter, quicker, and more accurate processes, AI tools are changing the way credit scores are tracked and calculated. S

We’ve compiled the 3 main ways AI is leaving its mark on credit score management, so let’s talk about them now.

1. AI credit monitoring and alerts

Checking your credit score has historically been a reactive procedure. After your loan application was denied, you would discover that your credit score is lower than you had believed. It was simply a guessing game.

Since AI has come onto the scene with proactive notifications and real-time credit monitoring, everything has changed. These tools check your credit usage, bill payments, and spending patterns to find things that could be affecting your score.

In general, AI tools can: 

• Instantly notify you if your credit score declines as a result of late payments or excessive credit use.
• Find errors in credit reports and mark them for fixing.
• AI can explain how a decision may impact your credit score before you make a financial decision.

Fun fact: AI can analyse more than 100 data points to give more precise assessments in contrast to traditional credit scoring, which takes only 5-10 factors into account.

2. Smart credit risk evaluations for lenders

In October of 2023, McKinsey & Company found that 80% of credit risk organisations are planning to implement generative AI technologies within a year. The value of AI is simply seen in both numbers and trends.

Instead of just looking at prior payback history, income levels, and current credit accounts, AI helps lenders look at a wider range of financial behaviors, helping gauge credit risk way better. 

Some key features AI brings to credit risk assessments include:

• Alternative data analysis

To create a more comprehensive credit profile, AI can evaluate utility bills, rent payments, and even spending trends.

• Predictions based on machine learning

AI algorithms can forecast a borrower’s likelihood of loan default, which undoubtedly helps lenders in making more informed decisions.

• Real-time creditworthiness updates

AI continuously updates a person’s creditworthiness based on their most recent financial behaviour, rather than basing it on out-of-date reports.

For people with little credit history, AI is making loans more accessible. At the same time, it is lowering the risk for financial institutions towards unreliable borrowers.

Pro tip: Off-the-shelf solutions won’t always fit your business. Instead of using generic credit analysis tools, your business should leverage custom software services in Australia to build your own credit score management system tailored to your customer base for maximum results.

1. H3: 3. Fraud detection and credit score protection

Credit security and fraud prevention are yet other areas where AI is leaving its mark. Since identity theft and fraudulent credit activity are on the rise, AI tools are taking charge of processing huge volumes of data to identify and stop fraud before it can affect someone’s credit score.

Here are some main features AI is bringing into the scene:

• Anomaly detection, whereby AI finds suspicious behaviour like fast credit applications or unexpectedly huge purchases.
• Behavioural biometrics, through which AI tools monitor spending trends and find unauthorized transactions that are far from typical behaviour.
• Automated dispute resolution, whereby AI assistants help individuals dispute fraudulent charges and repair their credit score.

 Ultimately, AI helps protect against identity theft and stop lenders from granting credit to fraudulent applicants in real-time.

At the end of the day, AI is making credit score management faster, smarter, and more personalised. It gives lenders and individuals the tools to make better financial decisions, be it through credit score alerts, fraud prevention, or real-time credit monitoring.

As we look into the future where AI is even more powerful and accepted, we see better accuracy in credit management solutions. If you’re looking to adapt to the new world of credit score management, leveraging AI tools is inevitable.