A wavelet-based data analysis to credit scoring

Nowadays, the dramatic growth in consumer credit has made ineffective the methods based on the human intervention, aimed to assess the potential solvency of loan applicants. For this reason, the development of approaches able to automate this operation represents today an active and important research area named Credit Scoring. In such scenario it should be noted how the design of effective approaches represents an hard challenge, due to a series of well-known problems, such as, for instance, the data imbalance, the data heterogeneity, and the cold start. The Centroid wavelet-based approach proposed in this paper faces these issues by moving the data analysis from its canonical domain to a new time-frequency one, where this operation is performed through three different metrics of similarity. Its main objective is to achieve a better characterization of the loan applicants on the basis of the information previously gathered by the Credit Scoring system. The performed experiments demonstrate how such approach outperforms the state-of-the-art solutions.