AI-Powered Alternative Credit Scoring Platform
Overview
Traditional credit scoring models (e.g. FICO) rely on limited historical data and often exclude
millions of potential borrowers. Globally, about 1.5 billion people are unbanked and even among
banked individuals, fewer than half qualify for credit under traditional criteriadatrics.ai. These
legacy scorecard systems require substantial past borrowing history to produce a score, which
creates a barrier for newcomers who might be creditworthy but have no established credit file
datrics.ai. The result is that many individuals – especially those with thin credit files or from
underserved markets – cannot access loans despite low risk profiles. The AI-Powered Alternative
Credit Scoring Platform addresses this problem by leveraging machine learning and alternative
data to assess creditworthiness more holistically. It aims to improve financial inclusion and risk
accuracy where traditional scoring falls short.
Solution Summary
The proposed solution is an AI-driven credit scoring platform that aggregates diverse data
sources and applies advanced machine learning to generate a predictive credit score. Instead of
relying only on static credit bureau data, the system analyzes a wide range of traditional and non-
traditional variables (e.g. income flows, bill payments, telecom and utility records, online
transaction patterns) to evaluate a borrower’s likelihood of repayment. By using ML algorithms
trained on large datasets, it can identify subtle patterns and correlations that signal credit risk,
producing a more comprehensive and dynamic risk profile for each applicantdatrics.ai. Lenders
receive an AI-generated credit score (and accompanying insights) that reflects real-time
indicators of creditworthiness, enabling better-informed lending decisions. In short, this AI-
powered approach yields a scoring system that is more inclusive (scores people with little or no
credit history), more accurate (better predicts default risk), faster (automated in real-time), and
more adaptive (updates with new data trends) than traditional methodsdatrics.ai. This
combination of breadth of data and intelligent modeling helps extend credit to underserved
borrowers while managing risk for lenders.
System Architecture
Figure: Simplified system architecture of the AI-powered credit scoring platform. Raw data from
multiple sources is processed through feature engineering, evaluated by an ML model, and then
delivered as a credit score with insights. The architecture is organized into modular components
that handle data input, analysis, scoring, and decision output in an end-to-end pipeline. Key
components include:
Data Ingestion Layer: Connects to various data sources (financial records, alternative
data providers, APIs) and consolidates the information. This layer handles extraction of
applicant data from both traditional datasets (credit bureaus, bank statements) and
alternative streams (e.g. mobile phone metadata, e-commerce activity, social media
signals). It ensures data quality by performing validation and normalization of incoming
data.
Feature Engineering Module: Transforms raw data into meaningful features for the
model. This module cleans the data and computes relevant financial and behavioral
indicators (for example, income stability, payment patterns, expense ratios, text-derived
credit signals). By converting heterogeneous inputs into a structured feature set, it creates
a comprehensive applicant profile that the ML engine can interpret.
ML Scoring Engine: The core machine learning model that produces the credit score.
This predictive engine may consist of an ensemble of algorithms or a deep neural
network trained on historical loan outcomes. It analyzes the engineered features to
estimate the probability of default or a numeric credit score. The ML engine is tuned to
recognize complex non-linear patterns in the data, enabling it to evaluate creditworthiness
even for those with no traditional credit file. It operates in real-time to score new
applications and is periodically retrained with new data to improve accuracy over time.
Decision Layer: The final layer that translates model results into actionable credit
decisions and insights. It takes the raw score from the ML engine and applies business
rules or threshold criteria to recommend approve/reject decisions or set credit limits.
Importantly, this layer can generate explanation reports or reason codes alongside the
score (using eXplainable AI techniques) to inform lenders why a score was given –
crucial for transparency and compliance. The decision layer exposes the outputs via an
interface or API so that lenders can seamlessly integrate the AI score into their existing
loan origination workflows.
Workflow
The end-to-end credit scoring process involves several key steps from data ingestion to score
generation:
1. Data Collection: When a loan application is received, the platform gathers the
applicant’s data from multiple sources. This can include pulling credit bureau records,
bank transaction data, paystub or cash-flow information, as well as querying alternative
data sources (such as phone bill payment history, utility payments, or public records). All
relevant raw data is aggregated in the ingestion layer.
2. Data Processing & Feature Engineering: The collected data is then automatically
cleaned and processed. Missing values are handled and disparate data points are
transformed into a consistent format. The feature engineering module calculates key
metrics and features from the raw inputs – for example, average account balance,
income-to-expense ratio, timeliness of past payments, or even derived attributes like
social network trust indicators. These features collectively represent the applicant’s
financial behavior and risk factors.
3. ML Model Scoring: Next, the engineered feature set is fed into the machine learning
scoring engine. The ML model (pre-trained on a large dataset of past borrowers with
known repayment outcomes) evaluates the new applicant’s features against learned
patterns. It then produces a credit risk score or rating. For instance, the model might
output a score on a 300–850 scale or a probability of default. Along with the score, the
system can identify which factors most influenced the outcome (for example, high
income stability might offset a lack of credit history).
4. Decision and Output: Finally, the decision layer interprets the score and generates an
output for the lender. If the score meets a predefined cutoff, an “approve”
recommendation can be issued; otherwise a “decline” or referral to manual review is
suggested. The platform delivers the results via a dashboard or API, including the credit
score, a summary of the analysis, and explanation insights (e.g. top contributing factors).
Lenders can then use this information to finalize their credit decision. The entire
workflow from data ingestion to score output can occur within seconds to minutes,
enabling real-time credit scoring for loan applicants. (Optionally, over time the system
can incorporate performance feedback – such as whether the borrower repaid on time – to
continually refine the ML model, though this retraining loop occurs offline and
periodically.)
Invention Disclosure Summary
What does the invention do? – It provides an AI-powered platform for credit scoring
that evaluates loan applicants using a broad set of data (including alternative/non-
traditional sources) to produce a creditworthiness score and recommendation. This
invention enables lenders to assess borrowers who lack extensive credit history,
expanding credit access while managing risk.
How does it work? – The system works by automatically collecting diverse financial and
behavioral data about an applicant, processing that data into key features, and then
applying a machine learning model to calculate a predictive credit score. It uses patterns
learned from historical data to estimate the likelihood that the applicant will repay a loan.
The results are delivered along with explanations to support decision-making.
What are the components? – Major components include: (1) a Data Ingestion
subsystem to gather and consolidate data from various sources; (2) a Feature
Engineering module to clean and transform raw data into model-ready features; (3) an
ML Scoring Engine (the trained machine learning model) that generates the credit score;
and (4) a Decision Layer that interprets the model output, applies business rules, and
provides the final score, decision suggestion, and explanations to users.
What is the process? – The process begins with data retrieval for a new credit applicant,
followed by data preprocessing and feature calculation. Next, the prepared data features
are input into the ML scoring engine, which computes a credit score or risk estimate for
the applicant. This score is then passed to the decision layer, where it is compared against
approval criteria and packaged into a recommendation (approve/deny) with supporting
insights. Periodically, the ML model is retrained using new loan performance data to
improve future predictions.
How do the components interact? – The components operate in a pipeline: the Data
Ingestion layer feeds the collected raw data into the Feature Engineering module; the
Feature Engineering module outputs a set of features that flow into the ML Scoring
Engine; the Scoring Engine produces a score which is sent to the Decision Layer. Each
component passes its outputs to the next, forming a seamless workflow. In practice, these
components may interact through API calls or message queues – for example, the
ingestion layer calls the feature engineering service once data is collected, which in turn
invokes the ML model service. The Decision Layer then queries the ML service for the
score or listens for the score event, and finally delivers the result to the lender’s systems.
This design is modular, so each part can be updated or scaled independently (for instance,
the ML model can be updated without changing data ingestion logic). The end result is a
cohesive platform where data, model, and decisioning components work together to
produce an intelligent credit score for each applicant.
