Improving Credit Risk Assessment through Deep Learning-based Consumer Loan Default Prediction Model

Abstract

This study aims to enhance credit risk identification, improve loan borrower review efficiency, and increase default prediction accuracy rate using data mining and machine learning techniques. The study also employs deep learning to develop a consumer loan default prediction model that minimizes credit risks and ensures consistent development. The researchers collected data from a survey of 1000 participants, stratified into local and foreign banks, and selected the top 11 banks based on turnover and customer volume. To construct the machine learning model, Keras, a neural network library that runs on TensorFlow, was utilized. The model predicts loan applicant default likelihood. The study's practical implications demonstrate a noteworthy success rate of customer default prediction, which can significantly benefit banks. The model was evaluated on a test set of 250 records and achieved a test set accuracy of 95.2%, correctly predicting the default state of 238 out of 250 respondents.