AI, Big Data, and Your New Credit Score

One thing that is common among most Americans is that they love to buy isht on credit. That inclination is only growing with the passage of time in part due to low interest rates and because there is just so much cool stuff to buy and so little money on hand. Here’s a look at this trend courtesy of 60 Second Statistics:

Now we’re not sure how it works in other countries, but the way it works in the U.S. is that you have a credit score which is a basic indicator of how likely you are to pay back a loan. When an institution loans you money, the likelihood of you paying back that loan helps determine the interest rate as well. Higher risk begets higher interest rates. For that reason it is extremely important that any lending firm accurately assess your financial picture. That’s kind of hard to do with just a 3 digit number. This is where “big data” steps into the picture and you may not like what we have to say. While there are no doubt loads of firms out there that claim to evaluate your ability to payback a loan using big data and/or artificial intelligence (AI), for the purposes of this article we’re just going to focus on one startup called DemystData.

Founded in 2010, Singapore startup DemystData has taken in a total of $12 million in funding so far with their latest Series B of $7 million closing last October. The firm uses big data to help the world’s largest telcom providers, insurers, and lenders to “optimize their workflows” which essentially means determine your potential as a customer using big data from over 150 different sources. Here are some categories:

This isn’t just about making more accurate lending decisions, but it’s also about cross-border lending. As the world becomes smaller and smaller, people are moving about and credit scores just don’t exist in all places like they do in the U.S. where most our readers live. In fact, the company founder, Mark Hookey, founded the company after moving to Hong Kong and realizing that he couldn’t use his U.S. credit score in another country.

Instead of that single U.S. credit score consisting of 3 numbers, DemystData uses over 5,000 different attributes which they claim is more than any other provider out there. Their technology isn’t exactly just entering the market as it has already been used on over 400 million customers. Are you dying to hear about what sort of information they are gathering about you in order to assess your credit worthiness? So are we. Here are three examples:

Income Consistency – Come on now, we’ve all been tempted to fudge our income just a bit. It’s not even about wanting to get approved, it’s just that our egos make us want everyone to think that we make more than we actually do. The Demyst algorithms compare your self-reported income with things like your job title (LinkedIn maybe?), your life status (kids cost a lot money), the industry you work in (radiology isn’t looking to hot these days), and your purchase behavior (restaurants you frequent as an example).

Telcom Data – This one took us by surprise. There is a wealth of data that can be pulled from your phone records. As an example, Demyst lists “phone location matching” as an attribute under “fraud protection”.