AI and Your Credit Score: Know the Risks, Legal Protections, and How to Fight Back

As AI advances at a blistering pace, it is being utilized in a variety of new sectors, and credit assessment and reporting is one such area. Using automated systems and machine learning, credit reporting agencies are analyzing massive data sets to predict consumer creditworthiness and generate credit scores. How is your credit score impacted by AI? What data is used to determine your score? And can we trust AI with such an important task?

How Does AI Impact Your Credit Score?

The AI and machine learning models used by Credit Reporting Agencies (CRAs) are only as good as the data sets used to feed them. To this end, CRAs scrape massive data sets from a variety of traditional and non-traditional data sources. Traditional data sources include borrowing and loan repayment, while non-traditional sources include spending patterns, and even things like social media activity and location tracking, which may raise privacy concerns. All of this data is fed into the A,I which in turn outputs your credit rating. Actual examples of AI usage in the credit reporting space include FICO Score 10, which uses AI to identify trends in your financial habits, and fraud detectio,n which uses AI to spot suspicious behavior.

What Are the Risks of AI Deciding Your Credit Score?

While the rise of AI technology may increase efficiency and even contribute to consumer safety, like with fraud prevention, AI has its fair share of concerns. There is a risk of perpetuation of historical bias and discrimination; AI can reflect biases in the data sets it is given if not put in check. One recent case involving AI displaying a bias was the Apple Card controversy in 2019, where it was observed that AI-derived credit limits were significantly lower for women than men with similar credit profiles. 

AI draws from vast data sets beyond normal credit information, which makes it difficult to pinpoint the source of the error. An issue that stems from this is a lack of transparency and opacity in the credit system. With AI, it is difficult for consumers to know why their score was affected or why they were denied credit. AI is also not perfect, and it may misinterpret a consumer's financial behavior negatively. This also makes it difficult to dispute errors made by the AI, because it is not always apparent what factors contributed to the lower score.

What Are Your Rights When AI Gets It Wrong?

The Fair Credit Reporting Act (FCRA) gives consumers the right to dispute inaccurate credit information resulting from AI errors. Consumers also have the right to know why they were denied and must be provided an Adverse Action Notice by lenders. 

The Equal Credit Opportunity Act (ECOA) protects consumers from discriminatory AI-driven lending practices and guarantees that persons with similar credit profiles receive equal opportunity for credit.

Proposed laws like the Algorithmic Accountability Act and increased scrutiny by the Consumer Financial Protection Bureau would require more robust assessments of AI’s fairness and would allow consumers to request human review of AI-made decisions.

What Should You Do If AI Affects Your Credit Score?

1. Check Your Credit Reports Regularly: You can request free annual credit reports from the three main credit reporting agencies (TransUnion, Equifax, and Experian) at AnnualCreditReport.com.

2. Review Your Credit Reports: Dispute any inaccuracies immediately. You have the right to an investigation, and any error must be corrected within thirty days.

3. Consult Consumer Rights Attorneys: Like our team at Tariq Law, for assistance in assessing your dispute process or any escalation with credit reporting agencies.

4. Know Your Rights: Know your rights under the FCRA and other relevant laws. Keep up to date on developments within the space, such as new laws, court cases, and state laws.

You Are Not Powerless – We Can Help:
The genie is out of the bottle, and AI in the Credit Reporting space is here to stay, but that doesn’t mean consumers like you are powerless. Knowing your rights and being proactive in exercising them can protect your financial health. We at Tariq Law specialize in consumer protection and credit reporting disputes. If you are having issues with credit reporting or being unfairly denied credit, because of AI or otherwise, we are here to help. Reach out to us to see how we can help advocate for your rights and secure your financial future.