Applied Mathematical Sciences, Vol. 7, 2013, no. 112, HIKARI Ltd,

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1 Applied Mathematical Sciences, Vol. 7, 2013, no. 112, HIKARI Ltd, Accuracy Rate of Predictive Models in Credit Screening Anirut Suebsing Department of Innovation Management, Faculty of Management Science Ubonratchathani University, Ubonratchathani, 34190, Thailand Chakarin Vajiramedhin Department of Innovation Management, Faculty of Management Science Ubonratchathani University, Ubonratchathani, 34190, Thailand Copyright 2013 Anirut Suebsing and Chakarin Vajiramedhin. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. Abstract Nowadays, data mining has been playing an important role in the various disciplines of sciences and technologies. However, one of the essential process of data mining is the data preparation because if without this process, the data mining tasks will provide bad results as well, especially in terms of classification task. There are several sub procedures of the data preparation but one of the most significant sub procedures ignored by many researches is data transformation techniques. Therefore, this paper presents the transformation techniques are important in the classification task of data mining, particularly our proposed approach in this paper. This paper focuses on increasing the accuracy of credit card screening predictive model as in the last several years, the credit card business is the extremely competitive market share that a number of credit card payment defaults are escalating. Thus, predictive model based on data mining can be applied to filter customers data to reduce a number of default customers. However, with the proposed approach in this paper, it can enhance the performance of accuracy rate of the predictive models for the credit screening data set effectively. During the evaluation phase, all accuracy rates of each predictive model based on the proposed approach shows the high performance compared with the accuracy rates of each predictive model that without using the proposed approach. Keywords: data mining, predictive model, credit screening

2 5592 Anirut Suebsing and Chakarin Vajiramedhin 1 Introduction Nowadays, data mining plays important in the highly competitive business world. That discovers the valuable information from a very large transaction database for supporting the business. The information has been applied to analysis, plan or manage [10]. In the financial industry, the data mining has been applied successfully in several fields such as the credit card approval. In the last several years, credit card business is the extremely competitive market share. The customers can sign up for credit cards easier using marketing strategies that focus on a few conditions. A number of credit card payment defaults are increasing. Therefore, data mining technique can be applied to filter customers data to reduce a number of default customers. Generally, the financial institutions have a screening of customers information before approving the credit card by using efficient techniques such as automatic predictive model. The predictive model is a supervised learning tool for predicting the customers behavior from their history data. The input data format is an important key of the accuracy performance besides the best predictive solution. If the format is suitable for processing, the predictive model would have the best performance. On the other hand, if the input data do not meet the agreement, the predictive model would make the experimental error. Thus the appropriate data help to enhance the efficiency and correctness of the algorithm. Data transformation is one of the processing data steps that converts the input data into suitable form. In this paper, we applied the data transformation with eight predictive model algorithms to predict credit card customer data. In this paper, we focus on how to increase an accuracy rate of predictive model for a credit approval to help banks to decrease a risk for a credit approval. The goal of scrutinization is to identify a group of customers who have a high probability to defraud the banks by ignoring to disburse money to the banks. In data mining based on the data transformation, it helps the banks to predict customers profiles or attributes are able to give the credit approval so that reduce the risk of bad debt. The remainders of this paper are organized as follows: Section 2 describes the research objectives. Section 3 reviews of the predictive model algorithms and data transformations. Section 4 describes the methodology in this paper. Section 5 illustrates the experimental results. Section 6 discusses the performance evaluation. Finally, conclusion is discussed in Section 7. 2 Related Work 2.1 Data transformation Data preprocessing is an important part of data mining preparing the input data before the data are processed [9] (see Fig.1). This step consists of several parts

3 Accuracy rate of predictive models 5593 such as data cleaning, data integration, data transformation and data reduction. The input data can be processed in their raw collected form but the accuracy percentage of predictive model may be reduced in case of incomplete data. That the quality of knowledge extracted from the data can be enhanced by its transformation [3]. Thus, data transformation is the phase in preprocessing that converts a source data format into appropriate data form. Fig.1 Data preprocessing for Predictive. 2.2 Predictive Model Predictive model is the area of data mining that is usually applied to classify the group of data such as a classification of customers credit card. The predictive model is a process to create a model of future behavior from the collected data. The model may be created from a simple or complex equation (see Fig. 2). In the financial industry, the future behavior predictive is very important thus many banks have adopted the predictive to predict the customer data for screening the customer information before approving the credit card. Thus, many predictive models ([2], [6], [7], [8]) have been proposed. Each model has its own advantages and disadvantages that the performance is measured by the percentage of accuracy predicting. Fig.2 Data preprocessing for Predictive. 3 Data Transform for Predictive Model In this section, an approach, which is used to transform a raw data to a new data by using the binary coding method, is a method for turning any characters into numerical values to help a predictive model for credit approval to enhance its accuracy rate. The data sets used in this paper must be changed numerical value.

4 5594 Anirut Suebsing and Chakarin Vajiramedhin The proposed approach is to divide a nominal attribute into n binary attributes, which is called binary coding or dummy coding, if there are possible values (here, n > 2), with 0/1 representing the absence or presence of each value. For instance, an attribute of sex in the data set which has two values as follows: man, woman, then this attribute can be turned into numeric based on binary coding as follows: Fig.3 An example of mapping nominal based on binary coding technique. In this paper, we focus on how to increase an accuracy rate of predictive model for a credit approval to help banks to decrease a risk for a credit approval. The goal of scrutinization is to identify a group of customers who have a high probability to defraud the banks by ignoring to disburse money to the banks. In data mining based on the data transformation, it helps the banks to predict customers profiles or attributes are able to give the credit approval so that reduce the risk of bad debt. After mapping character or nominal data into numerical data, we make all values of attributes in each data sets equivalent by using the Min-Max normalization. The Min-max normalization is the simplest normalization technique and the most commonly used to standardize the range of independent attributes or features of data sets ([4], [5]). Min-max normalization is the simplest normalization technique that is best-suited for the cases where the bounds of the scores produced by a classifier are known. V min = minimum of the value in the data set. V max = maximum of the value in the data set. In this case, given a set of matching values x i, i=1, 2,, M, the set of normalized scores is given by as follows:

5 Accuracy rate of predictive models 5595 x x i = V 1 min max V V min (1) Now, the experimental raw data sets have transformed by the proposed approach and they are ready to be used for increase the accuracy rate of the predictive model in credit screening. 4 Performance Evaluation In order to evaluate our proposed approach, the data sets from the UCI repository [1] (a Japanese credit screening data set) and KNN, Logistic, Smo, NaiveBayes, Kstar, VotedPerceptron, SGD, MultiClassClassifier algorithms, we used eight algorithms to evaluate the proposed approach because of increasing reliability of evaluating the proposed approach. Note that the measurement in this paper of the experimental results is based on the standard metrics for evaluations of accuracy rate for truth positive (TP) refers to the ratio between the number of correctly predicted values and the total number of values. This section shows the accuracy rate of different predictive models used the data set provided by the proposed approach and the original data set so that we compare the accuracy rate of each predictive model that used the different data sets. Table 1. Accuracy rate of different predictive models that used the proposed data set and original data set From Table 1, it shows all accuracy rates of each predictive model used the proposed data set are higher than the accuracy rates of each predictive model employed the original data set significantly especially the accuracy rates of KNN, Logistic, Kstar, and MultiClassClassifier models that are able to provide the rate more than 98 percent.

6 5596 Anirut Suebsing and Chakarin Vajiramedhin Fig.4 Accuracy rate of different predictive models. From the Result Section (see Fig.4), it shows the proposed approach can enhance the accuracy rate of the predictive models effectively. Because the proposed approach has transformed all characters of each attribute or column in the original data set to the numeric values in terms of binary code. Thus, it leads to many predictive model algorithms developed to support the numeric data sets can compute and a build the predictive model efficiently even if in the real-world applications, most of the predictive model algorithms can build the predictive model based on every type of data sets. Furthermore, the Min-Max method, which is used to make all values of attributes in the data set equivalent, is one of techniques proposed in the paper. After the data set was transformed to the numeric values, all values of attributes in the data set has to be made to standardization in order to avoid outlier values because this problem will make any predictive models built by any predictive model algorithms forecast ineffectively. Therefore, this method affects to the accuracy rate of the predictive model also. 5 Conclusion The proposed approach can reform the Japanese credit screening data set to the new one to improve the performance of accuracy rate of the predictive models. All accuracy rates of each predictive model shows the high performance compared with the accuracy rates of each predictive model used the original data set. When we focus on the accuracy rates of each predictive model based on the proposed data set in Table 1, it found that every accuracy rate of each predictive model is able to show performance impressively especially KNN, Logistic, Kstar, and MultiClassClassifier models providing the rate over than 98 percent.

7 Accuracy rate of predictive models 5597 Acknowledgement We would like to thank the Faculty of Management Science, Ubonratchathani University for the financial support. We are also grateful to the owner of the datasets, the UCI repository, for providing the available datasets. References [1] Asuncion, A., Newman, D., CA: University of California, School of Information and Computer Science, Uci machine learning repository. Irvine, February 8, [2] Hung, S., Yen, D. C., Wang H., Applying data mining to telecom churn manage-ment. Expert Systems with Applications, 2006, [3] Kusiak, A., Feature Transformation Methods in Data Mining. IEEE Transactions on Electronics Packaging Manufacturing, 24, 2001, [4] Li, C., Biswas, G., Unsupervised learning with mixed numeric and nominal data. IEEE Transactions on Knowledge and Data Engineering, 14, 2002, [5] Modugno, R., Pirlo, G., Impedovo, D., Score normalization by dynamic time warping, 2010 IEEE International Conference on Computational Intelligence for Measurement Systems and Applications (CIMSA), 2010, [6] Singh, R., Aggarwal., R. R., Comparative Evaluation of Predictive Modeling Techniques on Credit Card Data. International Journal of Computer Theory and Engineering, 3, 2011, [7] Wang, G., Et al., Predicting credit card holder churn in banks of China using data mining and MCDM IEEE/WIC/ACM International Conference on Web Intelligence and Intelligent Agent Technology, 2010, [8] Yu, Y., Song, L., The Issue and Risk Analysis of the Credit card Fourth International Conference on Business Intelligence and Financial Engineering, 2011, [9] A. Suebsing, N. Hiransakolwong, A novel technique for feature subset selection based on cosine similarity, Applied Mathematical Sciences, vol.6, no. 133, 2012, [10] C. Vajiramedhin, J. Werapun, EBPA: An efficient data structure for frequent closed itemset mining Applied Mathematical Sciences, vol.7, no.30, 2013, Received: August 16, 2013