Improved Credit Scoring Model Based on Bagging Neural Network

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.