Improving Credit Risk Prediction in Online Peer-to-Peer (P2P) Lending Using Imbalanced Learning Techniques

Peer-to-peer (P2P) lending is a global trend of financial markets that allow individuals to obtain and concede loans without having financial institutions as a strong proxy. As many real-world applications, P2P lending presents an imbalanced characteristic, where the number of creditworthy loan requests is much larger than the number of non-creditworthy ones. In this work, we wrangle a real-world P2P lending data set from Lending Club, containing a large amount of data gathered from 2007 up to 2016. We analyze how supervised classification models and techniques to handle class imbalance impact creditworthiness prediction rates. Ensembles, cost-sensitive and sampling methods are combined and evaluated along logistic regression, decision tree, and bayesian learning schemes. Results show that, in average, sampling techniques outperform ensembles and cost-sensitive approaches.