IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2608.24582.html

$\texttt{findr}$: Transparent and Fair Credit Risk Decisions through Semi-Structured Regressions

Author

Listed:
  • Victor Medina-Olivares
  • Stefan Lessmann
  • Jonathan Crook

Abstract

Credit risk models increasingly need to combine predictive accuracy with transparent explanations and auditable fairness constraints. Logistic regression remains attractive because its coefficients are easy to interpret, but it can miss nonlinear structure. Flexible models can improve prediction, but their explanations are often post-hoc and may not describe the decision rule itself. We introduce $\texttt{findr}$, short for flexible, interpretable deep regression, a semi-structured framework for binary credit risk modelling that decomposes the logit into an interpretable structured component and an orthogonal neural residual. The orthogonalisation separates coefficient-based effects from residual nonlinear variation, while an in-processing Wasserstein penalty mitigates group disparities by comparing score distributions during training. The framework also includes diagnostics that measure the structured component's contribution to logit variation, decision agreement, and local directional consistency. We evaluate $\texttt{findr}$ in a simulation study and on eight public credit datasets using score-level accuracy-fairness frontiers. The results show that $\texttt{findr}$ behaves close to logistic regression when the signal is approximately linear, while recovering much of the predictive gain of neural models when nonlinear structure is relevant. The diagnostics identify when coefficient-based explanations remain close to the full fitted model and when residual variation must also be examined. These findings support semi-structured modelling as a practical way to make performance, fairness, and interpretability trade-offs explicit in credit risk decisions.

Suggested Citation

  • Victor Medina-Olivares & Stefan Lessmann & Jonathan Crook, 2026. "$\texttt{findr}$: Transparent and Fair Credit Risk Decisions through Semi-Structured Regressions," Papers 2608.24582, arXiv.org.
  • Handle: RePEc:arx:papers:2608.24582
    as

    Download full text from publisher

    File URL: https://arxiv.org/pdf/2608.24582
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lessmann, Stefan & Baesens, Bart & Seow, Hsin-Vonn & Thomas, Lyn C., 2015. "Benchmarking state-of-the-art classification algorithms for credit scoring: An update of research," European Journal of Operational Research, Elsevier, vol. 247(1), pages 124-136.
    2. Kamesh Korangi & Christophe Mues & Cristi'an Bravo, 2021. "A transformer-based model for default prediction in mid-cap corporate markets," Papers 2111.09902, arXiv.org, revised Apr 2023.
    3. Dumitrescu, Elena & Hué, Sullivan & Hurlin, Christophe & Tokpavi, Sessi, 2022. "Machine learning for credit scoring: Improving logistic regression with non-linear decision-tree effects," European Journal of Operational Research, Elsevier, vol. 297(3), pages 1178-1192.
    4. Stevenson, Matthew & Mues, Christophe & Bravo, Cristián, 2021. "The value of text for small business default prediction: A Deep Learning approach," European Journal of Operational Research, Elsevier, vol. 295(2), pages 758-771.
    5. Kozodoi, Nikita & Jacob, Johannes & Lessmann, Stefan, 2022. "Fairness in credit scoring: Assessment, implementation and profit implications," European Journal of Operational Research, Elsevier, vol. 297(3), pages 1083-1094.
    6. Rada Dakovic & Claudia Czado & Daniel Berg, 2010. "Bankruptcy prediction in Norway: a comparison study," Applied Economics Letters, Taylor & Francis Journals, vol. 17(17), pages 1739-1746.
    7. Christophe Hurlin & Christophe Pérignon & Sébastien Saurin, 2026. "The Fairness of Credit Scoring Models," Management Science, INFORMS, vol. 72(1), pages 406-425, January.
    8. Nikita Kozodoi & Johannes Jacob & Stefan Lessmann, 2021. "Fairness in Credit Scoring: Assessment, Implementation and Profit Implications," Papers 2103.01907, arXiv.org, revised Jun 2022.
    9. Djeundje, Viani Biatat & Crook, Jonathan, 2019. "Identifying hidden patterns in credit risk survival data using Generalised Additive Models," European Journal of Operational Research, Elsevier, vol. 277(1), pages 366-376.
    10. David Rügamer & Chris Kolb & Nadja Klein, 2024. "Semi-Structured Distributional Regression," The American Statistician, Taylor & Francis Journals, vol. 78(1), pages 88-99, January.
    11. Korangi, Kamesh & Mues, Christophe & Bravo, Cristián, 2023. "A transformer-based model for default prediction in mid-cap corporate markets," European Journal of Operational Research, Elsevier, vol. 308(1), pages 306-320.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Schwab, Brandon & Kriebel, Johannes, 2026. "Mitigating adversarial attacks on transformer models in credit scoring," European Journal of Operational Research, Elsevier, vol. 328(1), pages 309-323.
    2. Baesens, Bart & Smedts, Kristien, 2025. "Boosting credit risk models," The British Accounting Review, Elsevier, vol. 57(4).
    3. De Bock, Koen W. & Coussement, Kristof & Caigny, Arno De & Słowiński, Roman & Baesens, Bart & Boute, Robert N. & Choi, Tsan-Ming & Delen, Dursun & Kraus, Mathias & Lessmann, Stefan & Maldonado, Sebast, 2024. "Explainable AI for Operational Research: A defining framework, methods, applications, and a research agenda," European Journal of Operational Research, Elsevier, vol. 317(2), pages 249-272.
    4. Koen W. de Bock & Kristof Coussement & Arno De Caigny & Roman Slowiński & Bart Baesens & Robert N Boute & Tsan-Ming Choi & Dursun Delen & Mathias Kraus & Stefan Lessmann & Sebastián Maldonado & David , 2023. "Explainable AI for Operational Research: A Defining Framework, Methods, Applications, and a Research Agenda," Post-Print hal-04219546, HAL.
    5. Emmanuel Flachaire & Gilles Hacheme & Sullivan Hu'e & S'ebastien Laurent, 2022. "GAM(L)A: An econometric model for interpretable Machine Learning," Papers 2203.11691, arXiv.org.
    6. Li, Zhe & Liang, Shuguang & Pan, Xianyou & Pang, Meng, 2024. "Credit risk prediction based on loan profit: Evidence from Chinese SMEs," Research in International Business and Finance, Elsevier, vol. 67(PA).
    7. Maarouf, Abdurahman & Feuerriegel, Stefan & Pröllochs, Nicolas, 2025. "A fused large language model for predicting startup success," European Journal of Operational Research, Elsevier, vol. 322(1), pages 198-214.
    8. Dimitrios Nikolaidis & Michalis Doumpos, 2022. "Credit Scoring with Drift Adaptation Using Local Regions of Competence," SN Operations Research Forum, Springer, vol. 3(4), pages 1-28, December.
    9. Belise Kanziga & Ya'e U. Gaba & Olivier Kanamugire, 2026. "Interpretable hybrid credit scoring for thin-file and underbanked populations," Papers 2608.26837, arXiv.org.
    10. Sultan Amed & Tanmay Sen & Sayantan Banerjee, 2026. "FSL-BDP: Federated Survival Learning with Bayesian Differential Privacy for Credit Risk Modeling," Papers 2601.11134, arXiv.org.
    11. Shen, Feng & Yang, Kexin & Zhou, Fanyin & Zhang, Wensha, 2026. "A hybrid multi-layered ensemble model based on heterogeneous information network for small and medium-sized enterprise default prediction," European Journal of Operational Research, Elsevier, vol. 332(3), pages 897-911.
    12. Sullivan Hué, 2022. "GAM(L)A: An econometric model for interpretable machine learning," French Stata Users' Group Meetings 2022 19, Stata Users Group.
    13. Katsafados, Apostolos G. & Leledakis, George N. & Pyrgiotakis, Emmanouil G. & Androutsopoulos, Ion & Fergadiotis, Manos, 2024. "Machine learning in bank merger prediction: A text-based approach," European Journal of Operational Research, Elsevier, vol. 312(2), pages 783-797.
    14. Tigges, Maximilian & Mestwerdt, Sönke & Tschirner, Sebastian & Mauer, René, 2024. "Who gets the money? A qualitative analysis of fintech lending and credit scoring through the adoption of AI and alternative data," Technological Forecasting and Social Change, Elsevier, vol. 205(C).
    15. Fabozzi, Frank J. & Recchioni, Maria Cristina & Renò, Roberto, 2025. "Fifty years at the interface between financial modeling and operations research," European Journal of Operational Research, Elsevier, vol. 327(1), pages 1-21.
    16. Topuz, Kazim & Urban, Timothy L. & Yildirim, Mehmet B., 2024. "A Markovian score model for evaluating provider performance for continuity of care—An explainable analytics approach," European Journal of Operational Research, Elsevier, vol. 317(2), pages 341-351.
    17. Ma, Xuejiao & Che, Tianqi & Jiang, Qichuan, 2025. "A three-stage prediction model for firm default risk: An integration of text sentiment analysis," Omega, Elsevier, vol. 131(C).
    18. Xia, Yufei & Han, Zhiyin & Li, Yawen & He, Lingyun, 2025. "Credit scoring model for fintech lending: An integration of large language models and FocalPoly loss," International Journal of Forecasting, Elsevier, vol. 41(3), pages 894-919.
    19. Kriebel, Johannes & Stitz, Lennart, 2022. "Credit default prediction from user-generated text in peer-to-peer lending using deep learning," European Journal of Operational Research, Elsevier, vol. 302(1), pages 309-323.
    20. Sahab Zandi & Kamesh Korangi & Juan C. Moreno-Paredes & Mar'ia 'Oskarsd'ottir & Christophe Mues & Cristi'an Bravo, 2025. "A Multimodal Approach to SME Credit Scoring Integrating Transaction and Ownership Networks," Papers 2510.09407, arXiv.org.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2608.24582. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: https://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.