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AI Model for Predicting Customer Delinquency

The document outlines a predictive modeling approach to forecast customer delinquency using AI, focusing on binary classification. It details steps including problem definition, data preparation, model selection (Logistic Regression, Random Forest, Gradient Boosting, Neural Networks), model training, and performance evaluation metrics. Additionally, it suggests deployment strategies to integrate the model into Geldium's risk pipeline and continuously retrain it with new data.

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yuvaadhika58
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8 views1 page

AI Model for Predicting Customer Delinquency

The document outlines a predictive modeling approach to forecast customer delinquency using AI, focusing on binary classification. It details steps including problem definition, data preparation, model selection (Logistic Regression, Random Forest, Gradient Boosting, Neural Networks), model training, and performance evaluation metrics. Additionally, it suggests deployment strategies to integrate the model into Geldium's risk pipeline and continuously retrain it with new data.

Uploaded by

yuvaadhika58
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© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd

Task 2: Predicting Delinquency with AI After completing EDA on Geldium’s dataset, the next step is

to outline a predictive modeling approach to forecast which customers are most at risk of
delinquency. Your goal is to use GenAI tools to help propose: 1. A predictive model concept 2. A
suitable modeling approach 3. A performance evaluation plan --------------------------------------
PREDICTIVE MODELING APPROACH -------------------------------------- 1. Problem Definition: -
Objective: Predict the likelihood that a customer will become delinquent. - Type of problem: Binary
Classification (Delinquent vs Non■Delinquent). 2. Data Preparation: - Select relevant features from
EDA results (income, credit score, loan amount, tenure, repayment history, etc.). - Encode
categorical variables using One■Hot Encoding or Label Encoding. - Normalize/standardize
numerical features if needed. - Split dataset into Train (70%), Validation (15%), and Test (15%). 3.
Model Selection: Recommended models for delinquency prediction: - Logistic Regression (baseline
model) - Random Forest Classifier (handles non■linear relations, robust) - Gradient Boosting
Models (XGBoost, LightGBM, CatBoost for best performance) - Neural Networks (optional for
complex patterns) 4. Model Training: - Train multiple models using cross■validation. - Tune
hyperparameters (max_depth, learning_rate, n_estimators, etc.). - Compare model performance on
validation data. 5. Performance Evaluation: Metrics to evaluate model effectiveness: - Accuracy
(overall correctness) - Precision (how many predicted delinquents are correct) - Recall (how many
actual delinquents are captured) - F1■Score (balance between precision & recall) - ROC■AUC
(overall model discrimination ability) - Confusion Matrix (error breakdown) Business-focused
evaluation: - Identify high■risk segments - Minimize false negatives (missed delinquents) -
Prioritize intervention strategies 6. Deployment Concept: - Integrate model into Geldium’s risk
pipeline. - Assign delinquency risk scores to new customers. - Trigger early■warning alerts for
high■risk customers. - Continuously retrain model using new repayment data.
-------------------------------------- This PDF outlines the required predictive modeling concept for Task
2.

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