Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/258143 
Year of Publication: 
2021
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 9 [Issue:] 3 [Article No.:] 54 [Publisher:] MDPI [Place:] Basel [Year:] 2021 [Pages:] 1-16
Publisher: 
MDPI, Basel
Abstract: 
Predicting if a client is worth giving a loan-credit scoring-is one of the most essential and popular problems in banking. Predictive models for this goal are built on the assumption that there is a dependency between the client's profile before the loan approval and their future behavior. However, circumstances that cause changes in the client's behavior may not depend on their will and cannot be predicted by their profile. Such clients may be considered "noisy" as their eventual belonging to the defaulters class results rather from random factors than from some predictable rules. Excluding such clients from the dataset may be helpful in building more accurate predictive models. In this paper, we report on primary results on testing the hypothesis that a client can become a defaulter in two scenarios: intentionally and unintentionally. We verify our hypothesis applying data driven regularized classification using an autoencoder to client profiles. To model an intention as a hidden variable, we propose an especially designed regularizer for the autoencoder. The regularizer aims to obtain a representation of defaulters that includes a cluster of intentional defaulters and unintentional defaulters as outliers. The outliers were detected by our model and excluded from the dataset. This improved the credit scoring model and confirmed our hypothesis.
Subjects: 
autoencoder
clustering
credit scoring
defaulters
machine learning
neural networks
regularization
transaction profiling
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
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