Reject inference in credit scoring based on cost-sensitive learning and joint distribution adaptation method

Abstract

As traditional credit evaluation methods generally only use accepted sample modeling, the rejected data is omitted, which means the model's prediction of new customers is biased. However, reject inference can be used to solve this credit evaluation sample selection bias. This paper proposes a new reject inference method based on joint distribution adaptation (JDA) and cost-sensitive semi-supervised support vector machines (CS4VM). First, this method uses both accepted (labeled) samples and rejected (unlabeled) samples modeling, which overcomes the deviations in traditional credit evaluation methods. Second, as the accepted sample and the rejected sample distributions are different, this method reduces the distribution differences between the accepted and rejected sample sets, which ensures that the sample data conforms to the basic assumptions in the semi-supervised model, and improves the performance of the classification model. Third, this method reduces the overall cost in the actual credit business by considering both the traditional misclassification costs when mining the default samples and the different decision weights for the accepted and rejected samples. Finally, an empirical study verifies the excellent predictive performance of the proposed method and effectively reduces the total credit costs.