Research on the Application of Alternative Data in Credit Risk Management

Abstract

With the development of financial technology, traditional credit assessment models have gradually shown their limitations. Especially in assessing borrowers with no credit history or weak credit records. The rise of alternative data provides a new dimension for credit risk prediction, including but not limited to social media behavior, online transaction records, geographic location data, etc. This paper explores the current application status, challenges, and future development trends of alternative data in personal credit risk assessment, and explores the application and effects of various forms of alternative data through different classifications. This paper refers to the relevant literature on alternative data and credit risk management and finds that the application of alternative data can not only supplement part of the information reference to enhance the risk management model but also further provide certain credit credentials for groups that cannot obtain credit services with traditional credit data. It has potential contributions to improving credit risk management and promoting the development of inclusive finance.