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    How To Build Credit Scoring Software in 2023

    Credit score software has become essential to the lending industry in recent years. It allows financial institutions to assess the creditworthiness of potential borrowers quickly and accurately, enabling them to make informed decisions on loan approvals and interest rates.   

    Credit risk decisioning is based on analyzing objective data: an individual’s credit history, payment behavior, and other factors. That way, credit scoring software solutions have enabled financial companies to reduce loan defaults and improve profitability. As these platforms evolve and advance, they undoubtedly play a vital role in shaping the industry’s future.  

    Choose Between Traditional and Alternative Credit Scoring   

    While traditional credit scoring methods have proven effective, alternative credit scoring has emerged in recent years that offer additional benefits.  

    Traditional scoring typically relies on limited data points to determine creditworthiness, such as credit history and payment behavior. However, alternative credit score platforms incorporate a broader range of data sources, for example, utility bill payments, employment, or rental history. This additional information allows lenders to gain a more comprehensive understanding of an individual’s financial situation.  

    Alternative scoring also offers greater flexibility for people with limited credit histories or non-traditional sources of income. Furthermore, it can also reduce bias in the credit decision-making process. Traditional credit scoring methods may inadvertently discriminate against certain groups, for example, low-income individuals. Alternative credit scoring models can help eliminate these biases by using more diverse data points in their assessments.  

    Benefits of Alternative Credit Scoring

    Consider Using Open Banking for Alternative Scoring  

    One of the primary sources of data for alternative credit scoring is transactional data, which is made possible through Open Banking. This includes income and expenditure patterns, cash flow, and debt-to-income ratio, which can provide a more comprehensive understanding of an individual’s financial health.  

    In addition to transactional data, alternative credit scoring models may also use data from non-traditional sources, such as social media activity and online shopping behavior. By analyzing this data, alternative credit scoring models can gain insights into an individual’s lifestyle and spending habits, which can be used to evaluate credit risk.  

    Determine Credit Scoring Criteria  

    Before embarking on a project to implement a new credit scoring system in your financial business, it’s essential to have a clear understanding of the criteria used to determine creditworthiness. This includes various factors, such as credit history, income, age, employment history, etc.  

    By clearly understanding the criteria used to determine creditworthiness, you can ensure that your credit scoring system is designed to accurately assess risk, make well-informed lending decisions, and provide a better customer experience.  

    Find the Reliable IT Vendor for Credit Scoring Development  

    When developing credit-scoring software solutions, choosing the right IT vendor that can deliver the required expertise and experience is crucial to ensure the project’s success. At Exposit, we have extensive experience in fintech solutions development.   

    One of our successful projects is Plend, a consumer lending marketplace that offers affordable loans based on a unique scoring system. We helped Plend to develop a fintech solution for making fairer credit deals with a better understanding of a borrower’s financial situation. The new credit analysis system includes scoring, configuration, and authentication modules in a visual dashboard.  

    The configuration module includes three stages within the validation process with set rules for managing loan applications. The scoring module receives the financial information about borrowers from third-party services and exchanges this data with the configuration module and its rules. At the end of the process, the lender is provided with the necessary information for deciding the result of a loan application.  

    Another project in the financial industry is Bankish, a credit scoring and deposit system designed for convenient interaction between financial institutions and their clients. This core banking software solution allows institutions to add and customize financial products, give credits with risk-based pricing and deposits, manage arrears, initiate outbound payments and get incoming, and communicate with customers.  

    We provided Bankish with a scoring module in the system to address the specific needs of each institution. The system collects a borrower’s personal data from a profile and other resources, such as age, salary level, loan and arrears history, and cost information. Based on this data using credit scoring models, it help to decide on loan issuing or rejection. However, every institution has its own custom criteria for decision-making, which was the challenge we helped our client solve.    

    Get Started on the Development Process  

    The development and implementation of a credit application software solution can significantly impact your financial company’s success. By leveraging the latest technology and data sources, you can make more informed lending decisions and offer more personalized loan terms to your customers.  

    At Exposit, we have vast experience developing custom credit scoring systems tailored to our client’s unique needs. Our team of experts can work with you to identify your requirements, design and develop a custom solution, and provide ongoing support and maintenance to ensure the continued success of your credit rating software.  

    If you want to learn more about how we can help you implement a new credit scoring system in your financial business, we invite you to schedule a consultation with our experts.