Abstract
This research is aimed at the case of credit scoring in risk management and presents a novel machine learning method to be used for the default prediction of high-risk branches or customers. This study uses the Kruskal-Wallis non-parametric statistic to form a conservative credit-scoring model and to study the impact on modeling performance on the benefit of the credit provider. The findings show that the new credit scoring methodology represents a reasonable coefficient of determination and a very low false-negative rate. It is computationally less expensive with high accuracy with around 18% improvement in Recall/Sensitivity. Because of the recent perspective of continued credit/behavior scoring, our study suggests using this credit score for non-traditional data sources for online loan providers to allow them to study and reveal changes in client behavior over time and choose the reliable unbanked customers, based on their application data. This is the first study that develops an online non-parametric credit scoring system, which is able to reselect effective features automatically for continued credit evaluation and weigh them out by their level of contribution with a good diagnostic ability.
Original language | English |
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Article number | 114835 |
Pages (from-to) | 1-16 |
Number of pages | 16 |
Journal | Expert Systems with Applications |
Volume | 176 |
Early online date | 10 Mar 2021 |
DOIs | |
Publication status | Published - 15 Aug 2021 |
Keywords
- Big Data
- Kruskal_Wallis statistic
- Machine learning
- Online credit scoring
- Open banking
- Risk analysis
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Dive into the research topics of 'A conservative approach for online credit scoring'. Together they form a unique fingerprint.Prizes
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First Prize for the presentation of "A non-parametric-based computationally efficient approach for credit scoring using non-traditional data", at the 8th International Conference on Risk Analysis and Design of Experiments
Ashofteh, Afshin (Recipient), 26 Apr 2019
Prize: Prize (including medals and awards)