AI and Your Credit

Social credit system and human scoring as biometric analytics or personal data analysis in a 3D illustration style.

#moneymonday #faithfulfinance

Artificial Intelligence (AI) has infiltrated every aspect of our lives and therefore it’s no surprise that our finances and other financial decisions are being affected by machine learning.

More and more we are experiencing the effects of AI, through its analysis of consumer spending habits, and to offer promotions that cater to individual preferences. But what if AI is used to deny you credit and how does AI impact your credit score on which so many financial decisions depend? Here’s what you should know.

Current Regulations

The Equal Credit Opportunity Act requires creditors who use AI to render an adverse decision regarding a persons’ credit will have to identify such reasons. Creditors who used AI would provide generic responses and blame the lack of specific reasons on complex AI logarithms. This requirement is applicable to creditors even though they use complex algorithms, and black-box models that make it difficult to identify those reasons. This regulation was recently clarified two weeks ago by the Consumer Financial Protection Board (CFPB). The clarification now states that credit companies using AI to render adverse reasons concerning your credit must provide both accurate and specific reasons why you are denied.


The enforcement of this clarification will result in consumers being treated more fairly, and in some ways reduce what is known as digital redlining. An example of how this would work is if a creditor has decided to lower your credit because of a change inRobot using a holographic, virtual computer your behavioral spending habits, and cite the reason as “purchasing history”, that would not be in compliance with the law. This example highlights a common experience among consumers who choose to be responsible with the use of their credit when it comes to their credit cards.

Credit companies and others for a long time have penalized those of us who have decided not to use our credit cards unless it’s an emergency as a way of managing debt. But instead, the reward for debt management and being responsible stewards is to lower an individual’s credit, and perhaps resulting in a lower credit score. With this new clarification and ruling of the Act, creditors will have to provide detail and specific negative behaviors which have resulted in the lowering of a persons’ credit.

Digital redlining essentially follows some of the same rationale and principles of redlining in the housing and mortgage industry. With this type of redlining you find AI being used, for example, by landlords to deny individuals opportunities who qualify as tenants to rent properties. A recent CFPB report regarding AI-processed applications of tenants revealed that data was applied to the wrong individuals; outdated information remained on applicants’ reports; AI included criminal records and misleading information about arrests along with incorrect eviction reports.

What I am saying is that despite your best efforts to be a good steward of your finances, AI is now playing a bigger role in determining your credit qualifications and scores. The takeaway here is for consumers to be more aware of their credit, the factors that affect whether you are successful or denied, and the reasons for higher interest rates relating to your finances.


Today’s What’s Up is a follow up about payment Apps protection. Perhaps you have never stopped to consider this, but what if the bank where Cash App keeps your money goes bankrupt, is your money or transaction protected? Last week I shared that your funds are not covered by the Federal Deposit Insurance Company (FDIC). To be clear the money you store in your Cash App account is not insured unless you have a Cash App card. However, the money you transfer from your bank account to another person is covered by FDIC under what is known as “pass through” insurance. This coverage is limited to the FDIC maximum of $250,000.00. The best thing you can do is not to use Cash App or any of these other peer to peer companies as your bank and do not retain money in those accounts. And that’s what’s up!

Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC. Give2Get Rich, LLC 2023. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.

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