Calculating the Probability of Loan Repayment — Using MLOps for Credit Scoring

Introduction

  • It is a significant loss for the company to reject a loan request if the requester can return it.
  • It is a significant loss for the company to accept a loan request where the borrower will not pay the loan in the future.
  • Fully paid: Applicant has fully paid the loan.
  • Current: The installments process is ongoing, i.e., the loan agreement is not yet completed. These candidates are not labeled as ‘defaulted.’
  • Charged-off: Applicant has not paid the installments in due time for an extended period, i.e., they have defaulted on the loan.

Dataset description

Exploratory Data Analysis and Feature Engineering

  1. Fully Paid
  2. Charged off
  3. Current
  4. Default
  5. Late (31–120 days)
  6. In Grace Period
  7. Late (16–30 days)
  8. Does not meet the credit policy. Status: Fully Paid
  9. Does not meet the credit policy. Status: Charged Off
  10. Issued
Figure 1.1 & Figure 1.2
Figure 2.1 & Figure 2.2
Table 1: the percentage of null values in different columns
Figure 3: Histogram of Home Ownership with Loan Status
Figure 4: Code for dummy values

Model building/implementation

Artificial Neural Network

Table 2: Artificial Neural Network performance metric on the test set

XGBoost

Table 3: XGBoost performance on the test set

Random Forest

Table 4: Random Forest Performance on the test set

Conclusion

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