Artificial Intelligence is Redefining the Credit Approval Process

Today, we’re gonna dive into a fascinating topic about how Artificial Intelligence is redefining the Credit Approval Process.

More and more, Artificial Intelligence, or algorithms, are playing a central role in deciding whether an individual gets approved for a credit card, a personal loan, a mortgage, or even a job, and if this sounds futuristic, you may be right, because not all lenders or employers have adopted Artificial Intelligence for their credit approval process, or their credit background checks, but it’s coming.

Now, you might be thinking to yourself that by eliminating the ‘human element’, and by replacing the human with Artificial Intelligence, can make the online credit application process more convenient, and might even speed up the credit approval process, but don’t be fooled.

When you remove the ‘human touch’ from the credit approval process, for the sake of speed and convenience, there are concerns.

The Rise of Ai in Credit

In the past, before Artificial Intelligence, credit card companies, banks, and lenders made credit decisions by involving real people, known as Loan Officers, and these guys took the time to review your personal credit application with you, and evaluate your total financial story, and sometimes, if necessary, empathize with you, while offering you personal financial guidance.

Today, Ai-powered credit approval systems analyze thousands of personal data points in seconds, such as your credit score, income, spending habits, location, and YES, even your digital footprint.

Ai technology has certainly made credit approvals, and denials, faster than ever before, and in many cases, has absolutely reduced the need for human interaction.

However, Ai technology has also raised new issues, primarily algorithmic bias, lack of transparency, and a feeling of being judged by a machine with no emotion.

There are Real – Life Impacts

Imagine this:

Two applicants with similar credit profiles and similar credit scores apply for the same credit card. One gets approved while the other gets denied.

Why did this happen?

Because the Ai algorithm may have factored in, subtle data, that caused the applicant to get denied, such as the applicants online social media behavior, or the applicants ZIP code history, or some other unrevealed reason.

When you take the human element out of the credit application process, there is no opportunity for you, as the credit applicant, to explain your position, nor to clarify the content, or the context, of your credit report, nor is there an opportunity for the lender or credit company to ask follow-up questions.

As a result, many good people will begin to feel as though their personal value and creditworthiness is being boiled down to just numbers, and this new reality will hit hardest in many under-served communities.

So What We Lose Without People

Before Artificial Intelligence, human Loan Officers used to provide more than a simple APPROVAL or DENIAL to a credit applicant. In the past, Loan Officers took the time to go over with you, and explain to you, your credit situation, offering you solutions and guidance, and genuinely cared about helping their customer to establish and build a better credit profile.

Artificial Intelligence can not offer this kind of human support, at least not yet, and frankly, I don’t know if it ever will.

In the past, Loan Officers infused their own personal emotion, their own intuition, and used their own discretion to soften the edges of cold data.

By removing humans, or Loan Officers, from the credit approval process, we are removing empathy, and the human dynamic, from making credit decisions, and that is a cost that is hard to measure.

So What’s Next

Look, Artificial Intelligence is not going away, and in many ways, it’s revolutionizing the credit industry.

But we have to ask ourselves:

How do we bring back human compassion and a ‘personal touch’ into these digital Ai systems?

Some corporations that rely on credit scores are experimenting with hybrid models, like using Ai along with a human providing oversight. Others are pushing for greater algorithm transparency.

As we barrel our way into an automated future, my hope has been that we not lose sight of what makes personal credit truly work, which is understanding the PERSON behind the numbers.

Unfortunately, my hope has been fading, as we are losing sight of the human element, at least when it comes to the credit approval process.

The reality, in my view, is that Ai, in fact, is going to take over a lot, if not all, of the credit approval process, and this is my clarion call for everyone to do all that they can, to improve what is on their credit report and to raise their credit score, and to also manage their money wisely, and to increase their value in the work force, and finally, to be mindful when posting and creating their social media footprint.

Artificial Intelligence is penetrating our personal and professional lives tremendously fast and we have no choice but to try to keep up.

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