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Machine Learning with R

You're reading from   Machine Learning with R Expert techniques for predictive modeling

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Product type Paperback
Published in Apr 2019
Publisher Packt
ISBN-13 9781788295864
Length 458 pages
Edition 3rd Edition
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Author (1):
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Brett Lantz Brett Lantz
Author Profile Icon Brett Lantz
Brett Lantz
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Table of Contents (16) Chapters Close

Preface 1. Introducing Machine Learning FREE CHAPTER 2. Managing and Understanding Data 3. Lazy Learning – Classification Using Nearest Neighbors 4. Probabilistic Learning – Classification Using Naive Bayes 5. Divide and Conquer – Classification Using Decision Trees and Rules 6. Forecasting Numeric Data – Regression Methods 7. Black Box Methods – Neural Networks and Support Vector Machines 8. Finding Patterns – Market Basket Analysis Using Association Rules 9. Finding Groups of Data – Clustering with k-means 10. Evaluating Model Performance 11. Improving Model Performance 12. Specialized Machine Learning Topics Other Books You May Enjoy
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Index

Example – identifying risky bank loans using C5.0 decision trees


The global financial crisis of 2007-2008 highlighted the importance of transparency and rigor in banking practices. As the availability of credit was limited, banks tightened their lending systems and turned to machine learning to more accurately identify risky loans.

Decision trees are widely used in the banking industry due to their high accuracy and ability to formulate a statistical model in plain language. Since governments in many countries carefully monitor the fairness of lending practices, executives must be able to explain why one applicant was rejected for a loan while another was approved. This information is also useful for customers hoping to determine why their credit rating is unsatisfactory.

It is likely that automated credit scoring models are used for credit card mailings and instant online approval processes. In this section, we will develop a simple credit approval model using C5.0 decision trees. We will...

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