How AI is rewriting 70 years of lending rules

For most of modern finance, one number has quietly dictated who gets ahead and who gets left out: the credit score. It was a breakthrough when it arrived in the 1950s, becoming an elegant shortcut for a complex decision. But shortcuts age. And in a world driven by data, digital behavior, and real-time signals, the score is increasingly misaligned with how people actually live and manage money.

We’re now at a turning point. A foundational system, long considered untouchable, is finally being reconstructed by using AI—specifically, advanced machine learning models built for risk prediction—to extract more intelligence from existing data. These are rigorously tested, well-governed systems that help lenders see risk with greater nuance and clarity. And the results are reshaping core economics for lenders.

THE CREDIT SCORE WASN’T BUILT FOR MODERN CONSUMERS

Legacy credit scores rely on a narrow slice of information updated at a pace that reflects the black-and-white television era. A single late payment can overshadow years of financial discipline. Data updates lag behind real behavior. And lenders are forced to make million-dollar decisions using a tool that can’t see volatility, nuance, or context.

A single, generic credit score is a compromise by design. National credit scores are designed to work reasonably well across thousands of institutions, but not optimally for any specific one. That becomes clear when you compare regional differences. A lender in an agricultural region may see very different income seasonality and cash-flow patterns than a lender in a major metro area—differences that a universal score was never designed to capture. Financial institutions need models built around their actual membership that can adjust to different financial histories and behaviors.

That rigidity has created the gap we’re now seeing across the economy. Consumers feel squeezed, lenders feel exposed, and businesses struggle to grow in a risk environment that looks nothing like the one their scoring tools were built for.

Modern machine-learning models give lenders something the score never could—a panoramic view instead of a narrow window.

HOW AI CHANGES THE GAME

The data in credit files has long been there. What’s changed is the modeling—modern machine learning systems that can finally make full use of those signals. These models can evaluate thousands of factors inside bureau files, not just the static inputs, but the patterns behind them:

• How payment behavior changes over time
• Which fluctuations are warning signs versus temporary noise
• How multiple variables interact in ways a traditional score can’t measure

This lets lenders differentiate between someone who is truly risky and someone who is momentarily out of rhythm. The impact is profound: more approvals without more losses, stronger compliance without more overhead, and decisions that align with how people actually manage their finances today.

For leadership teams, this also means making intentional choices about who to serve and how to allocate capital. Tailored models let institutions focus their resources on the customers they actually want to reach, rather than relying on a one-size-fits-all score.

AI FIXES SOMETHING WE DON’T TALK ABOUT ENOUGH

There’s widespread concern about AI bias, and rightly so. When algorithms aren’t trained on a representative set of data or aren’t monitored after deployment, this can create biased results. In lending, these models aren’t deployed on faith; they’re validated, back-tested, and monitored over time, with clear documentation of the factors driving each decision. Modern explainability techniques, now well-established in credit risk, can give regulators and consumers a clearer view into how and why decisions are made.

Business leaders should also consider that there is bias embedded in manual underwriting. Human decisions—especially in high-volume, time-pressured environments—vary from reviewer to reviewer, case to case, hour to hour.

Machine learning models that use representative data, are regularly monitored, and make explainable, transparent decisions, giving humans a dependable baseline. This allows them to focus on exceptions, tough cases, and strategy.

THE NEW ADVANTAGE FOR BUSINESS LEADERS

The next era of lending will be defined by companies that operationalize AI with discipline, building in strong governance, clear guardrails, and transparency. Those who do will see higher approval rates, lower losses, faster decisions with fewer manual bottlenecks, and fairer outcomes that reflect real behavior, not outdated shortcuts.

For the first time in 70 years, we’re able to bring real, impactful change to one of the most influential drivers in the economy.

THE FUTURE ISN’T A SCORE, IT’S UNDERSTANDING

If the last century of lending was defined by a single, blunt number, the next century will be defined by intelligence. By the ability to interpret risk with nuance, adapt to fast-moving economic signals, and extend opportunity to people who have long been underestimated by the system.

AI won’t make lending flawless. But it gives us the clearest path we’ve ever had toward a credit ecosystem that is more accurate, more resilient, and far fairer than the one we inherited.

And for leaders focused on growth, innovation, and long-term competitiveness, that shift is transformational.

Sean Kamkar is CTO of Zest AI.