Improved Credit Scoring Model Based on Bagging Neural Network

Adnan Dželihodžić, Dženana Đonko () and Jasmin Kevrić ()
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Adnan Dželihodžić: Faculty of Engineering and Natural Sciences, International Burch University, Francuske revolucije bb Sarajevo, Bosnia and Herzegovina
Dženana Đonko: Faculty of Electrical Engineering, University of Sarajevo, Zmaja od Bosne bb Sarajevo, Bosnia and Herzegovina
Jasmin Kevrić: Faculty of Engineering and Natural Sciences, International Burch University, Francuske revolucije bb Sarajevo, Bosnia and Herzegovina

International Journal of Information Technology & Decision Making (IJITDM), 2018, vol. 17, issue 06, 1725-1741

Abstract: The problem of nonperforming loans is one of the biggest problems in the banking sector. In order to mitigate this problem, it is necessary to improve the methods of credit risk assessment. One way to minimize credit risk is to improve the assessment of the creditworthiness of the applicant. In order to make a more accurate assessment, many models have been developed using classification techniques. This paper demonstrates the use of classification techniques in the form of a single classifier or in a classifier ensemble setting. We proposed bagging as a model ensemble using artificial neural networks. In the experiment conducted with the Bosnian commercial banks dataset, the proposed model showed promising results according to evaluation criteria, especially after the process of feature selection. Both individual and wrapper feature selection methods were used. Bagging with neural network (NNBag) outperforms commonly used techniques with accuracy improvement from 1% to 5%. The superiority of the proposed model (NNBag) is confirmed on two widely available datasets for assessing creditworthiness. Based on experimental results on three datasets, it is proven that NNBag is suitable for use in the assessment of the creditworthiness of applicants.

Keywords: Classification; credit assessment; ensemble techniques (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S0219622018500293

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