Credit Inequality and Artificial Intelligence
By: Geff Woodward
In the land of opportunity, where dreams are said to come true, there exists a persistent and troubling issue that affects millions of Americans: credit inequality. While the United States prides itself on its economic prosperity and upward mobility, the harsh reality is that access to credit is far from equitable. In this blog, we'll delve into the intricacies of credit inequality in America, exploring its root causes, consequences, and potential solutions.
Credit inequality, at its core, refers to disparities in access to affordable credit and financial services among different groups of people. It's important to note that credit inequality is closely intertwined with other forms of economic inequality, such as income and wealth inequality. One of the primary factors contributing to credit inequality is the reliance on credit scores to determine creditworthiness.
Those with limited or poor credit histories often find themselves excluded from favorable lending terms, making it difficult to access credit for important life events like buying a home or starting a business. Systemic Discrimination also plays a part in this inequality disparity. Discrimination based on race, gender, and ethnicity is a deep-seated issue that affects credit access. Studies have shown that historically marginalized groups face greater obstacles in obtaining credit, even when controlling for other factors.
This discrimination may present when seeking loans or mortgages. A recent study of nearly 7 million 30-year mortgages by the University of California at Berkeley found that African-American and Latino applicants were charged higher interest when compared with White borrowers. But the most concerning thing is that, even when they applied online, minorities still ended up paying higher rates. Somehow, lending institutions have been able to reproduce that discrimination in software-based lending.
The issue seems to lay on the fact that despite Artificial Intelligence (AI) and Machine Learning (ML), online home lending applications were built from old mortgages that were already biased. Programmers loaded in large data sets to teach the system how to respond to new information, and then it identifies historical patterns within the data that will be used to make future lending decisions.
Given all the above, it would not surprise anyone that another study that analyzed 10 million mortgage applications from Home Mortgage Disclosure Act (HMDA) data, showed thatAfrican-Americans had the highest denial rates for mortgages in 2018 at 17.4% while White borrowers had the lowest at 7.9%. We are depriving people of one of the basic human rights: a home.
More than ever, given the current financial and real estate situation, there is a pressing need for an unbiased financial score that can objectively and holistically measure consumers' financial heath from scratch.
AI is not inherently perpetrating credit inequality, but it can inadvertently exacerbate existing disparities if not used and regulated responsibly. The impact of AI on credit inequality largely depends on how it is implemented and the data it relies on.
AI itself is a tool, and its impact on credit inequality depends on how it is designed, implemented, and regulated. While AI has the potential to make lending more efficient and inclusive, it also carries the risk of perpetuating existing inequalities if not used responsibly and with careful consideration of its potential biases. Balancing technological innovation with ethical and equitable practices is essential to ensure that AI benefits all members of society.
The Negative Cycle of Debt
By: Geff Woodward
Did you know that 40% of Americans don’t have $400 in the bank for an emergency? Our education system teaches us very important subjects such as History, Math, and English. However, it unfortunately doesn’t teach us important and necessary matters for successfully navigating our daily life, such as how to save, invest, file your taxes, or get a mortgage.
Financial ignorance can end up costing a lot of money; higher loan interest rates, paying an expert to do your taxes, or even worse, reaching retirement with little or no savings.
The cycle often begins innocently enough. People may take on debt to finance education, buy a home, or start a business. While these are legitimate reasons to borrow money, either excessive borrowing and/or poor financial planning can set the stage for trouble. When debt spirals out of control, it can create a never-ending cycle of financial hardship, stress, and anxiety. This negative cycle of debt is a trap that ensnares countless people worldwide, making it essential to understand its mechanisms and learn how to break free from its grip.
The most significant factor in the negative cycle of debt is interest. Over time, the interest on borrowed money can compound, making it increasingly difficult to repay the principal amount. High interest rates can escalate the problem further. Many borrowers initially manage their debt by making minimum payments, which often cover only the interest and a small portion of the principal. This approach prolongs the repayment period and leads to a never-ending cycle. As the interest accumulates and minimum payments are made, the total debt continues to grow. Borrowers might resort to using credit cards or taking out new loans to cover their everyday expenses, thereby deepening their financial woes.
As debt mounts, stress and anxiety become constant companions. The pressure to meet monthly payments, combined with the fear of falling behind, can have detrimental effects on mental and emotional well-being. Persistent debt and missed payments can lead to a plummeting credit score. A low credit score can affect one's ability to secure future loans, rent an apartment, qualify for insurance products, or even find employment in some cases.
The negative cycle of debt is a daunting challenge, but it is not insurmountable. By taking proactive steps, creating a solid financial plan, and seeking professional guidance when necessary, you can break free from the shackles of debt. Remember that financial freedom and peace of mind are worth the effort it takes to escape this vicious cycle.
The good thing is that, nowadays, there are plenty of resources online, as well as institutions, dedicated to promoting financial literacy. We at VeraScore believe that Financial Education should be a key cornerstone of our product and mission. That’s why we have partnered with leading organizations like Centsai, who are dedicated to bringing you the best resources available. VeraScore’s main goal is to not only ensure that the underserved groups of America are able to get access to loans, but to prevent them from falling into this negative cycle of debt.
Who are the Credit Invisible
By: Geff Woodward
According to recent studies, out of 255 million adults in the United States, 49 million are not scorable using conventional credit scores. That means that they are either “credit invisible” or “credit unscorable” and therefore cannot access credit.
The term "credit invisible" refers to individuals who have no credit history on record with the major credit bureaus, making it difficult for them to obtain traditional forms of credit, such as loans or credit cards. These individuals are often seen as "invisible" to lenders because there is no information available to assess their creditworthiness.
Credit invisibility can affect a wide range of people, including:
Young adults: Young people who have just started their financial journey and have not yet taken out loans or credit cards often have little to no credit history.
Recent immigrants: People who have recently moved to a new country may not have a credit history in their new country.
Low-income individuals: Those with limited financial resources may not have access to traditional credit and therefore may not have an extensive credit history.
Older adults: Some seniors who have paid off all their debts and no longer use credit may also become credit invisible over time.
Being “credit invisible” can have a significant impact on a person's ability to access financial services and secure favorable terms on loans. Contrary to what is normally thought, the reasons behind being categorized as “credit invisible” normally have nothing to do with someone’s creditworthiness. Usually, they are consumers who do not have accounts or consumers who have never used credit.
On the other hand, there are also the "credit unscorable," which are individuals for whom credit bureaus and scoring models are also unable to generate a credit score. This typically occurs when there is insufficient credit history or information available to assess a person's creditworthiness. There are several reasons why someone might be considered “credit unscorable”:
Limited Credit History: Like the “credit invisible”, individuals with limited credit history often fall into the “credit unscorable” category. This can include young adults who are just starting to establish credit or recent immigrants who are new to the credit system.
Sparse Credit History: Some people may have a very limited credit history with only a few accounts or transactions, making it challenging for credit scoring models to calculate a score accurately.
Inactive Credit Accounts: If a person has had credit accounts in the past but hasn't used them for an extended period, their credit file may become too inactive to generate a score.
No Recent Activity: Lack of recent credit activity, such as applying for new credit or making payments on existing accounts, can also lead to being “credit unscorable”.
Unusual Circumstances: In some cases, unusual financial circumstances or factors can make it difficult for scoring models to generate a score. This might include identity theft, inconsistencies in credit reports, or other unique situations.
The “credit invisible” population is currently made up of nearly 28 million people, and the “credit unscorable” population currently comprises 21 million people. These untapped segments constitute approximately 18% of the US adult population, a big chunk of the client base for whom financial institutions are rushing to reach, serve, and u;timately would like to set loyalty patterns.
Whether “credit invisible” or “credit unscorable”, it can be really difficult to pull oneself out of these precarious financial circumstances. With VeraScore, we provide this significant percentage of the population with a way out. A VeraScoreTM Financial Health Score will allow these currently underserved individuals to demonstrate that they are financially responsible enough to handle a loan. What this demographic needs is a chance - a helping hand up to get them started. At VeraScore, we believe that everyone deserves a chance, regardless of their age, race, gender, or current economic situation.
The Relationship Between Credit Scores & Default Probability
By: Geff Woodward
The relationship between credit scores and default probability is a fundamental concept in the field of credit risk assessment. Credit scores are numerical representations of an individual's, or entity's, creditworthiness, and they are used by lenders to predict the likelihood of a borrower defaulting on their loans or credit obligations. Default probability refers to the likelihood that a borrower will fail to make required payments on their debt obligations, leading to default.
The relationship between credit scores and default probability is generally inverse, meaning that as a person's credit score improves, their likelihood of defaulting decreases, and vice versa. For this reason, one could think that the higher the credit score, the less likely the loan default rate.
Unfortunately, this is not an entirely accurate assessment. Recent analyses demonstrate the ineffectiveness of the conventional scoring mechanism. For example, during the 2008 subprime mortgage crisis, default rates for all borrowers increased precipitously, regardless of credit score. Even worse, one study found that “higher FICO scores have been associated with bigger increases in default rates over time.”
In the above figure it is shown that the higher the credit score, the larger the increase in serious delinquency rates between 2005, 2006 and 2007. For example, for borrowers with the lowest credit scores (FICO scores between 500 and 600), the serious delinquency rate in 2007 was 2X (twice) as large as in 2005—an increase of nearly 100 percent over the two years. For borrowers with the highest credit scores (FICO scores above 700), the serious delinquency rate in 2007 was almost 4X (four times) as large as in 2005—an increase of nearly 400 percent. In addition, the serious delinquency rate in 2007 for the best-FICO group was almost the same as the rate in 2005 for the worst-FICO group.
In summary, the urge to renovate the current credit scoring model is higher than ever. If we want to accurately and correctly assess consumers’ financial health, and mitigate future lending crises, lending institutions must adopt new algorithms and methods to evaluate individual consumers' solvency. Types of credit is not a predictor, but rather a means for credit bureaus to push consumers to have many different types of debt/credit and hence different ways to potentially get into financial trouble. The more “diverse” types of credit a consumer has, the better the consumer will score for this factor. Having a diverse portfolio of credit is, by no stretch of the imagination, a predictor for future credit behavior or credit risk.
VeraScore’s patented platform is fundamentally different to the legacy credit rating model. While credit scores are a one-time snapshot that rely on weeks-old reporting from lenders, VeraScore delivers a more accurate and detailed (holistic, objective, transparent, and ultimately predictive) real-time analysis of a consumer’s financial health. As a result, a more realistic picture of the borrower is presented and default risk is considerably lowered and mitigated.
Financial Control = Financial Freedom
By: Geff Woodward
In today’s world, it is easy to feel that we are not in control. Data, information, and even opinions are collected, interpreted, and managed by a variety of services that we engage with as we move throughout our daily lives. This is especially true when it comes to our finances, especially with regard to credit scores. The credit bureaus collect data on our credit and loan activities from our creditors and use it to generate a credit score about us. While we are integral in this activity, we do not manage, control, or even own that data and have very little insight into how our credit score is created - let alone any ability to dynamically affect the resulting score.
What are we to believe? That one size fits all? Or even that three sizes fit MOST? When we think of clothing that way, logically it doesn’t make sense given all the varieties of humans out there. But that is what the credit scoring system has done to our finances. They’ve split us up into small cohorts, based on zip code, job type, and income. This means that we are not measured objectively within the entire demographic of consumers with credit scores.
What about international consumers? Credit scores from other countries don’t count in the US, and a migrant has to then start from scratch. What about people who don’t already have credit?
Not everyone’s lifestyle, life stage, current financial situation, financial needs, and financial goals are the same. So why should your credit score be determined by your ability to have debt, rather than your proven ability to service your debt properly? It shouldn’t! Your life is unique and in flux. You should be measured holistically, objectively, and transparently. What may be true about your financial life today may not be the next.
There’s a lot of misinformation and confusion around the credit scoring system. Because even if you don’t realize it, credit companies are also trying to sell something – your data.
Financial author Nathan W. Morris suggests, “It’s not always that we need to do more but rather that we need to focus on less.”
VeraScore is different. With VeraScore, you own your data and your score, period. You decide if and when to provide that information to a creditor. VeraScore can also help you organize and clarify your financial goals so that you can prioritize and plan. The VeraScore factors show you objectively, holistically, and transparently how you are performing financially, and allow you to adjust your behavior and have a realistic view of your financial health. Seeing the trends and adjustments you might want to make can help you plan accordingly and get the most out of your money – now and for the future.
You can look at risk vs. return, saving vs. paying off debt, retiring now or later, or spending in retirement. Then you can prioritize and feel comfortable moving forward. Credit scores examine none of these things.
You wouldn’t take just one medication if you have ten problems. Financial health is equally complex. But in order to take control, first you must be able to measure all the parameters and analyze that data. Fortunately, VeraScore does this for you. It’s the only app that analyzes all your financial data, from all your accounts, and presents you with a true picture of your financial health in a clear and friendly dashboard – without judgment. This allows you to easily understand the actual status of your finances and take appropriate action.
Maybe it’s a cliché, but what really drives VeraScore, and drives each and every one of our team members, is to help people, to impact people’s lives in a positive way, to remove inequality, and change a little bit of how the system (doesn’t) works.
That’s why, in our mission statement, we explicitly express:
VeraScore levels the playing field for individuals, especially those that have been underserved or felt “left behind” by traditional credit scoring companies. We promote financial literacy and empower people to take control of their financial health, which will ultimately make them a more compatible match for potential lenders.
How the Credit Scoring Industry Works (and Doesn’t!)
By: Geff Woodward
The credit scoring industry, little changed in the last 40 years, is not positioned to be the best arbiter of credit decisions for many of today’s consumers. The industry has been very concentrated for a long time. It is essentially comprised of only four companies – three credit bureaus (Equifax, Experian, and TransUnion) and one scoring model player (Fair Issac, better known as FICO). With huge barriers to entry, and no serious outside competition, these competitors have enjoyed oligopolistic profits for many years. They profit by selling your data and you can’t opt out. They SELL your financial data to financial institutions for profit and this information determines IF you get a loan and at what rate and terms.
There are many shocking, recent discoveries from studies about the credit-scoring agencies. You may be surprised to learn that you don’t own your own credit score or even the data used to calculate it. The credit-scoring companies keep their algorithms as proprietary and have a limited scope of data used for the calculations. They are completely reliant on credit reporting data from credit bureaus. The limited scope of the credit data makes it difficult to ascertain the true credit worthiness of many consumers. With little or no information about a consumer’s income, and fixed and variable expenses (except for debt payments), there is no real way for a credit score to accurately estimate if the consumer can handle additional debt. In other words, credit scores cannot actually gauge a consumer’s credit worthiness for a new loan. A $10,000 car loan for someone who earns $40,000 a year is way riskier than to someone that makes $400,000 a year.
You might be even more surprised to find that the data is often wrong, especially since the pandemic – and that it is being used in more places for more purposes than ever before (note – as reported in this CNN article from August of 2022). This means that the accuracy of credit scores is inextricably tied to the accuracy of this data. Unfortunately, studies have clearly shown how poor the accuracy of these credit reports are (79% contained errors, 25% contained serious errors that could result in denial of credit, etc. – as reported in this CNN article from August of 2022). Based on the number of complaints the situation has not improved. Complaints in 2020 were up over 60% from the previous record in 2019. Also, creditors are not required to report consumer data to the credit bureaus. For example, positive information from fringe lenders is typically not reported while negative information is almost always reported. Ultimately, if you cannot rely on the data in the calculations, you cannot rely on the result – the credit score.
Another surprise for many is that the credit-scoring companies can leave out entire sectors of the population. If a consumer does not have any credit (e.g., does not have/use credit cards, does not have loans, etc.), the consumer is considered “credit invisible”. Also, if a consumer has not used credit recently (or has just started using credit), the consumer is considered “credit unscorable”. Neither of these groups will have a credit score. In 2020, about 22% of the US adult population (almost 49 million) fell into one of these two categories. Even if these people pay all their bills on time and are generally considered financially healthy, they are usually denied access to mainstream credit vehicles. The reason for this is the very “narrow” view of financial data the credit scoring companies use. The more years you have been in debt, the better it is for your credit score (you read that right, yet it seems entirely wrong). If you have never had debt because you are foreign, young, or have simply had a healthy financial life, sorry, you don’t have a credit history. With the current credit scoring system, forget about getting a mortgage, a car loan, or even a simple credit card. And even though they know your name, social security number, and birth date, you better hope they’re all incredibly unique. Because more often than should be acceptable, Jane Doe #1 and Jane Doe #2’s information is inverted, or combined.
So, with all the misinformation and mistakes, what are consumers to do? All consumers are entitled to a free annual disclosure of their data upon request from each of the nationwide credit bureaus. Review your data and report any errors. But be warned, there is often a huge backlog for corrections to be made. Hope you’re not in a hurry in this fast-paced world. Use VeraScore!
Here’s to Your Health! VeraScore
By: Geff Woodward
Not all 80-year old’s are created equal. It would be ridiculous and even dangerous for doctors to assume that. Doctors evaluate physical health on an individual basis. Some 80-year old’s run marathons and some 50-year old’s can’t walk up a flight of stairs. But unlike physical health, your financial health is judged by one number – your credit score. All 700s are the same, despite any individual circumstances. And what’s worse is that unlike physical health where there are well-established factors - i.e. smoking is bad for you, exercising is good – financial health is judged on factors that often seem counterintuitive. Things that would appear to be good for your financial health can actually negatively affect your credit score. It’s almost like your doctor saying “maybe you should wear your seatbelt less often.” Here are a few things you might not be aware of that negatively affect your credit score.
Credit Limit
In a rising rate environment, people should probably be lowering their credit limits, thus limiting their exposure to “expensive” debt. Sort of like wearing a seat belt to reduce risk of injury. But with the current credit scoring system, lowering your credit limit will negatively affect your credit score because your credit utilization rate will increase. Ironically, obtaining additional credit cards will increase your credit score, even though it exposes you to more potential debt. Contrary to common sense, paying off the balance on your credit card each month will result in a lower credit score than if you actually carried a small balance from month to month.
Multiple Lines of Credit
We’ve all heard that having your credit score checked too many times will make it lower. This is due to the scoring algorithm used for a “hard credit inquiry.” This is the “inquiry” that is used before any credit can be extended to a consumer and can lower your score for up to 2 years – whether you take out the credit or not.
Paying Off Loans
Paying off loans can often cause a drop in your credit score. When you pay off a loan it does several things i) reduces the total number of credit accounts that you own, ii) reduces your credit mix between installment accounts (e.g., loans) and revolving accounts (e.g., credit cards), and iii) reduces the overall length of your credit record. When you have different types of credit loans, it shows that you can manage different types of debt.
Bankruptcy, Foreclosure or Lawsuits
These are some of the more obvious issues that can have a devastating effect on your credit score. The bigger issue is that despite these things generally being a one-time event, they will affect your credit for years to come. They place the consumer in the equivalent of “financial jail” for 10+ years without the possibility of parole. It’s like having your license revoked for one speeding ticket. With VeraScore, creditors can see a complete picture of your financial health thus determining whether you are a one-time or repeat offender.
VeraScore to the Rescue
VeraScore does not utilize the “hard inquiry” because a consumer can look at their own VeraScore100 times a day, or send it to100 lenders for loan consideration, without it negatively impacting their financial health. This enables consumers to shop for credit the same way they shop for anything else. It gives you and lenders a comprehensive financial health profile. It also gives you tools to improve your financial health that you can adjust to fit your life any time.
Composition of a Credit Score (& how to improve it!)
By: Geff Woodward
In our previous blog, we discussed the history of the credit score; how it came about and evolved into what it is today. We briefly mentioned what a credit score is actually composed of, but in this blog we’re going to take a deeper look at what affects a credit score.
Over 200 million American consumers have a credit file with one of the three CRAs (Credit Reporting Agencies), which include Equifax, Experian, and TransUnion. In addition to the specific credit score that each individual CRA gives a consumer on their related credit file, each consumer’s credit file also has a FICO score attached to it for overall access to credit and loans. Very few of these consumers understand just how their credit score is calculated. This is due primarily to the CRAs’ and FICO’s desire to keep the process opaque, as well as the current oligopoly that the CRAs and FICO have on credit scoring.
So what exactly is your credit score made of? What influences whether it goes up or down? Well, factors that impact your score fall into one of the following five categories:
Payment History: 35%
Amounts Owed: 30%
Length of Credit History: 15%
New Credit: 10%
Credit Mix: 10%
Payment History - Your account payment information, including any delinquencies and public records, is the largest deciding factor of your credit score. Do you have any late payments, bankruptcies, etc.? The optimal answer is 100% on time payments and no bankruptcies or public records.
Amounts Owed - This is how much you owe on your accounts. The amount of available credit you're using on revolving accounts is heavily weighted. For example, how much credit do you have available and how much are you utilizing at any given time? The optimal answer is less than 9% utilization at any given time.
Length of Credit History - How long ago you opened accounts and time since account activity are additional factors that you need to be aware of. For instance, how many years have you been using credit? The optimal answer is having credit accounts that are 9 years old or older.
New Credit - Your pursuit of new credit is among one of the smaller factors of influence. This includes “hard” credit inquiries and the number of recently opened accounts. Have you been applying for a lot of credit recently? The optimal answer is not pursuing any new credit accounts recently (note - a “hard inquiry” is a negative on your credit score and stays on your credit report for up to 2 years).
Credit Mix - The final factor is credit mix, or the experience you have with different types of credit. The more of a mix the better. There are two types of credit; revolving (e.g., credit cards) and installment credit (e.g., loans). Do you have experience with the two types of credit? The optimal answer is having a credit mix of 50/50 between “revolving” and “installment” credit accounts.
How to improve your credit score - Based on how the credit scores have been set up, as we have illuminated above, the first and most important action that you can take as a consumer in order to raise your credit score is to make all of your payments on time. A single late payment will hurt your credit score, two late payments will tip that part of your score into Sub-Prime territory and the effect lasts for 2 years. The second most important action that you can take as a consumer is to keep an eye on your credit utilization. Zero to 29% of utilizations is considered positive. More than 30% utilization will tip that part of your score into Sub-Prime territory, however that can be changed monthly as you pay down your credit card balances. The third action that you can take as a consumer in order to raise your credit score is to “age” your credit for as long as possible. Ideally, they like to see that all of your credit accounts are over 9 years AND are still being used periodically. Credit that is less than 5 years old will tip that part of your score into Sub-Prime territory. The fourth action that you can take as a consumer in order to raise your credit score is to limit the number of “hard inquiries” into new credit that you request at any given time. This is coupled with the length of credit copenet above. While it is tempting to respond to new credit card offers, the associated “hit” to your credit score is not usually worth the incentives that are being offered. Additionally, the “hard inquiry” request, whether or not you qualify for the requested credit, will negatively impact your credit score for 2 years. More than 3 “hard inquiries” will tip that part of your score into Sub-Prime territory. The final action that you can take as a consumer in order to raise your credit score is to balance the two types of credit and loans that you have, e.g., revolving and installment. Ideally you want an even split between these two types of credit (e.g., 50/50). More than a 60/40 split in either direction will tip that part of your score into Sub-Prime territory.
A Brief History of the Credit Score
By: Geff Woodward
Credit can be confusing. For the average American, credit knowledge is likely left to the wind, often remaining a mystery. Understanding the history of credit and credit scores can actually help us understand how we can better utilize the system that exists today.
When credit reporting first began, there were more than 2,000 credit bureaus across the United States. Over the course of the 20th century, that number shrunk down to just three. This remains the case for the credit bureaus that exist today.
During the 1950s, lending institutions started to develop analytic solutions, such as credit scoring, in order to evaluate a consumer’s ability to both qualify for credit and/or loans and the likelihood that said consumer would be able to repay the credit and/or loans for which they qualified. These initial credit scores were very rudimentary as they were built over the scarce data that was available at that time. Lenders were also hesitant to let consumers in on what they were assessing in order to evaluate someone’s creditworthiness. This was most likely due to personal bias and discrimination that was heavily ingrained in society at the time.
This personal bias and discrimination ultimately led the government to establish the 1974 Equal Credit Opportunity Act, which banned a lender from denying credit to a consumer based on gender, race, nationality, religion, or age. Credit scoring adoption accelerated in order to shield against discrimination lawsuits until the FICO (Fair Isaac Corporation) score was launched in the late 1980s. FICO became the first “generalizable” credit score. They were able to do this by working with the national credit bureaus to create a credit scoring model that could be used to evaluate all consumers in the same manner.
This then begs the question of how exactly is the FICO score calculated? The FICO score was developed using the only data and metrics which were easily available in those days. This criteria remains mostly untouched since then. The current components of a credit score are as follows:
(35%) Payment history
(30%) Amount owed
(15%) Length of credit history
(10%) Credit mix
(10%) New credit accounts
As anyone can see, these metrics do not measure someone’s creditworthiness, nor their ability to service any credit and/or loans for which that consumer qualifies. In fact, these metrics often actually promote consumer debt up to the edge of the financial cliff. Credit scores are enhanced by having multiple credit cards, the continued use of those credit cards, and having installment loans. Yet, those consumers who are financially secure do not use multiple credit cards. Conversely, those consumers who self-finance expenses are provided with a low credit score that is inaccurately assessed. On top of that, despite efforts to give everyone an equal opportunity, bias still finds its way into credit scoring.
In this series, we will continue to discuss and break down our knowledge of credit. An often opaque topic, our goal is to make it more transparent for the average American. We are also looking to explore a potential solution - an alternative to the credit score. It’s time that history adds another chapter to the credit story!
VeraScore is One Step Closer to Consumer Use
Make it stand out
We’re celebrating a major milestone as we unveil our fully operational MVP to the marketplace
By: Geff Woodward
Creating a Minimum Viable Product (MVP) is often the first milestone for start-up businesses. It functions as a proof of concept; what was once an idea, is now a tangible reality. There are many preliminary steps that go into the creation of an MVP. One aspect of this is beta testing, which helps ensure a product is fully functional. For this and many other reasons, finalizing an MVP is truly a testament of dedication to one’s mission, to the vision behind a product.
Here at VeraScore, we’ve recently completed the creation of our MVP and are one step closer to consumer use! I am beyond excited to share this revolutionary platform with both lenders and consumers. The fully operational MVP addresses the persistent challenge with the legacy credit rating model, which relies on stale information to provide a snapshot based on lending habits, not the holistic view of a consumer’s relevant financial information or the ability of the individual to repay debt.
Although AI is able to improve our lives through various functions, it unfortunately still learns from the humans at the source of data. If said humans have a bias, then it will leak into the AI’s algorithms. By using a patent-pending platform with AI and machine learning, our MVP will ensure that bias remains excluded from VeraScoreTM’s functionality.
We hope to liberate banks and other financial lenders to more accurately understand potential borrowers, as well as provide funding to under-banked individuals that have been victimized by the current credit rating system. Over 45 million Americans currently do not have access to credit, and VeraScoreTM delivers a detailed, real-time analysis of a consumer’s financial situation that aims to aid in empowering financial freedom to these consumers.
This SaaS-based model of a financial health score will flip the credit rating industry on its head with the hope to democratize lending practices and improve diversity within the credit landscape. VeraScore will continue to develop products and services which aim to improve financial literacy among borrowers.
I hope you join us on our journey as we launch our MVP! Stay connected to hear additional company news by following our LinkedIn at https://www.linkedin.com/company/verascore.