Papers › Best Practices for Responsible Machine Learning in Credit Scoring

Best Practices for Responsible Machine Learning in Credit Scoring

30 Sep 2024arXiv:2409.20536archive 2025-07-28

Giovani Valdrighi, Athyrson M. Ribeiro, Jansen S. B. Pereira, Vitoria Guardieiro, Arthur Hendricks, Décio Miranda Filho, Juan David Nieto Garcia, Felipe F. Bocca, Thalita B. Veronese, Lucas Wanner, Marcos Medeiros Raimundo

The widespread use of machine learning in credit scoring has brought significant advancements in risk assessment and decision-making. However, it has also raised concerns about potential biases, discrimination, and lack of transparency in these automated systems. This tutorial paper performed a non-systematic literature review to guide best practices for developing responsible machine learning models in credit scoring, focusing on fairness, reject inference, and explainability. We discuss definitions, metrics, and techniques for mitigating biases and ensuring equitable outcomes across different groups. Additionally, we address the issue of limited data representativeness by exploring reject inference methods that incorporate information from rejected loan applications. Finally, we emphasize the importance of transparency and explainability in credit models, discussing techniques that provide insights into the decision-making process and enable individuals to understand and potentially improve their creditworthiness. By adopting these best practices, financial institutions can harness the power of machine learning while upholding ethical and responsible lending practices.

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