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Applying Classification Algorithms to Past Loan Data
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Applying Classification Algorithms to Past Loan Data

Last Updated on July 5, 2022 by Editorial Team

Author(s): Gencay I.

Originally published on Towards AI the World’s Leading AI and Technology News and Media Company. If you are building an AI-related product or service, we invite you to consider becoming an AI sponsor. At Towards AI, we help scale AI and technology startups. Let us help you unleash your technology to the masses.

KNN, Decision Tree, Support Vector Machine, Logistic Regression

Photo by Scott Graham onΒ Unsplash

In this data set, I am going to conduct classification machine learning analysis on past loan data whichΒ are;

Content Table
Β· Data Visualization
Β· One hot encoding
Β· Feature Selection
Β· Normalize Data
Β· Classification
∘ K Nearest Neighbor
∘ Evaluation Metrics of KNN
∘ Decision Tree
∘ Evaluation Metrics of Decision Tree
∘ Support Vector Machine
∘ Evaluation Metrics of SVM
∘ Logistic Regression
∘ Evaluation Metrics of Logistic Regression
∘ Model Evaluation using a Test set
∘ Jaccard Scores
∘ F1 Scores
∘ Final Evaluation

Let's load the necessary libraries;

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The Loan_train.csv data set includes details of 346 customers whose loans are already paid off or defaulted.

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Lets loadΒ data;

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It is always efficient to look shape of data, to see the bigΒ picture.

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Now let's fix the data frames columnΒ type.

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Data Visualization

Let's see how many of each class is in our dataΒ set

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Let's plot some columns to understand better

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Let's look at the day of week people get theΒ loan

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We see that people who get the loan at the end of the week don't pay it off, so let's use Feature binarization to set threshold values less than dayΒ 4

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Now it is time to change categorical features to numerical because we will use machine learning algorithms.

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86 % of females pay their loans while only 73 % of males pay theirΒ loan

Let's convert male to 0 and female toΒ 1:

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One hotΒ encoding

Now let’s look education column.

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Image by Author- These are the features that we’re gonna use in our prediction.

We use dummies to transform education from categorical to numerical.

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Feature Selection

Let’s define features;

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Now it is time to define ourΒ label;

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Normalize Data

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Classification

These are the classification techniques that I will use in thisΒ Dataset.

  • K Nearest Neighbor(KNN)
  • Decision Tree
  • Support VectorΒ Machine
  • Logistic Regression

K NearestΒ Neighbor

Now it is time to split train and test data, as usual, 0.2–0.8Β portion.

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Now it is time to look into the accuracy of test and trainΒ data.

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To define bestΒ K;

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As we can see result 7 is the best K for ourΒ data.

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Image by Author- Fit theΒ Model

Evaluation Metrics ofΒ KNN

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Decision Tree

Now let's try using Decision Tree algorithms.

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To define the best of theΒ depth;

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5 is the best depth score according to accuracyΒ scores.

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Let’s conduct our algorithm then and evaluate;

Evaluation Metrics of DecisionΒ Tree

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Support VectorΒ Machine

Now let’s useΒ SVM.

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To find out the best model inΒ SVM;

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Evaluation Metrics ofΒ SVM

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Logistic Regression

Now it is time to use Logistic Regression.

Lets lock andΒ load;

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Train-test split;

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Find the bestΒ solver;

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Evaluation Metrics of Logistic Regression

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Model Evaluation using a TestΒ set

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Data processing;

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Jaccard Scores

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F1 Scores

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Final Evaluation

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Thanks, IBM for Machine Learning Tutorial which gets meΒ there.


Applying Classification Algorithms to Past Loan Data was originally published in Towards AI on Medium, where people are continuing the conversation by highlighting and responding to this story.

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