data

Article
Machine Learning for Credit Risk Prediction: A Systematic
Literature Review
Jomark Pablo Noriega 1,2, *,† , Luis Antonio Rivera 1,3,† and José Alfredo Herrera 1,4,†

1 Departamento Académico de Ciencia de la Computacion, Universidad Nacional Mayor de San Marcos,

Decana de América, Lima 15081, Peru; lriverae@unmsm.edu.pe or rivera@uenf.br (L.A.R.);
jherreraqu@unmsm.edu.pe (J.A.H.)
2 Financiera QAPAQ, Lima 150120, Peru
3 Centro de Ciências Exatas e Tecnologia, Universidade Estadual do Norte Fluminense Darcy Ribeiro,
Campos dos Goytacazes 28013-602, Brazil
4 Programme in Biotechnology, Engineering and Chemical Technology, Universidad Pablo de Olavide,
41013 Sevilla, Spain
* Correspondence: jomark.noriega@unmsm.edu.pe or jnoriega@qapaq.pe; Tel.: +51-987-521-006
† These authors contributed equally to this work.

Abstract: In this systematic review of the literature on using Machine Learning (ML) for credit risk
prediction, we raise the need for financial institutions to use Artificial Intelligence (AI) and ML
to assess credit risk, analyzing large volumes of information. We posed research questions about
algorithms, metrics, results, datasets, variables, and related limitations in predicting credit risk. In
addition, we searched renowned databases responding to them and identified 52 relevant studies
within the credit industry of microfinance. Challenges and approaches in credit risk prediction using
ML models were identified; we had difficulties with the implemented models such as the black box
model, the need for explanatory artificial intelligence, the importance of selecting relevant features,
addressing multicollinearity, and the problem of the imbalance in the input data. By answering
the inquiries, we identified that the Boosted Category is the most researched family of ML models;
the most commonly used metrics for evaluation are Area Under Curve (AUC), Accuracy (ACC),
Recall, precision measure F1 (F1), and Precision. Research mainly uses public datasets to compare
Citation: Noriega, J.P.; Rivera, L.A.; models, and private ones to generate new knowledge when applied to the real world. The most
Herrera, J.A. Machine Learning for significant limitation identified is the representativeness of reality, and the variables primarily used in
Credit Risk Prediction: A Systematic the microcredit industry are data related to the Demographic, Operation, and Payment behavior. This
Literature Review. Data 2023, 8, 169. study aims to guide developers of credit risk management tools and software towards the existing
https://doi.org/10.3390/ ability of ML methods, metrics, and techniques used to forecast it, thereby minimizing possible losses
data8110169
due to default and guiding risk appetite.
Academic Editors: Henry Han,
Qiannong (Chan) Gu, Diane Li, Keywords: loan; credit risk; prediction; machine learning; systematic literature review
Tie Wei and Jeffrey Yi-Lin Forrest

Received: 5 August 2023

Revised: 13 October 2023
1. Introduction
Accepted: 3 November 2023
Published: 7 November 2023 The digitalization of processes and AI are already part of our daily lives and have
been developing in all areas with which we interact, especially during the period of the
COVID-19 pandemic [1,2]. This trend continued with the promotion of online loans and
Internet sales [3], and in turn, with the increase in demand for credit and crowdfunding
Copyright: © 2023 by the authors. through the Internet in the short term [4–6], and considering the pandemic as an external
Licensee MDPI, Basel, Switzerland.
factor, it has considerably changed the economy, increasing uncertainty for financial institu-
This article is an open access article
tions, and consequently the need to generate new models to manage it [4]. The World Bank
distributed under the terms and
(WB) emphasizes that the banking sector is crucial because it improves the well-being of a
conditions of the Creative Commons
country’s population and is essential for the growth of the economy [7].
Attribution (CC BY) license (https://
In this competitive environment, financial institutions seek to differentiate themselves,
creativecommons.org/licenses/by/
4.0/).
generate shareholder value, improve the customer experience, and promote financial

Data 2023, 8, 169. https://doi.org/10.3390/data8110169 https://www.mdpi.com/journal/data

Data 2023, 8, 169 2 of 17

inclusion. In this sense, they face the challenge of adopting data-driven innovation (DDI)
to manage credit, customer and operational risk appetite, and seeking efficiency [8] while
being supported by information technology—cloud services, Internet of Things (IoT), BIG
DATA, AI and mobile telephony—known as the fourth industrial revolution [9]. This
is followed by its sustainable evolution towards virtuous interaction between humans,
technology, and the environment, called the fifth industrial revolution [10].
There are still many use cases for DDI and ML in financial institutions to solve [11,12].
There are gaps in the evaluation and precariousness in the results when processing large
volumes of information [13] using ML algorithms for real-time applications [8]. On the other
hand, using machine learning techniques, through association, collaborative filtering, along
with recommended and personalized content, systems can identify individual preferences
that could enrich the risk assessment [8]. Likewise, BIG DATA tools and technology could
help improve forecasts in changing markets, considering their analysis potential [11,14].
Utilizing machine learning in business intelligence to reduce the uncertainty of pay-
ment behavior, also called credit risk, is a necessity in the microfinance industry since it
allows for the analysis of large volumes of information generated, especially in the context
of post-pandemic COVID-19 and technological development [4,15]. The challenges are
determining which configurations of attributes and algorithms are best suited for the tasks,
together with identifying limitations in the applications. Consequently, we propose the
research topics shown in Table 1.

Table 1. Research Topics.

Motivation Research Topics

We wish to know what models the industry The algorithms, methods, and
and academics use to predict credit risk. models used to predict credit risk.
We wish to know what metrics to use in the
The metrics to evaluate the
industry for academics to evaluate the
performance of algorithms,
performance of algorithms, methods, or
methods, or models.
models to predict credit risk.
We wish to know the metrics accuracy,
The models’ accuracy, precision,
precision, F1 measure, and AUC of algorithms,
F1 measure, and AUC.
methods, or models to predict credit risk.
We wish to know what datasets to use in the The datasets are used in the
industry and for academics to predict credit risk. prediction of credit risk.
We wish to know what variables or features
The variables or features used
to use in the industry and for academics to predict
in the prediction of credit risk.
credit risk.
We wish to know the main problems or The main problems or
limitations to predicting credit risk. limitations of predicting credit risk.

2. Materials and Methods

Based on the research topics, we pose the questions in Table 2 as a first step. Using the
most relevant words related to our research topic, we build our search string and apply it
to the recognized databases: IEEE Xplore, Scopus, and Web Of Science (WOS). We consider
the studies belonging to articles from journals and conferences published from 2019 to May
2023 and are related to the computer science area as shown in Figure 1.
We identified 275 studies. There were 77 eliminations for being duplicates and 131 elim-
inations from applying the eligibility criteria (without full access to the document, without
ranking in Scimagojr, review article) and 15 eliminations for not having relevance after the
complete analysis of the document. We obtained as a result 52 revealing articles; we show
in Table 3 the result of the application of the inclusion and exclusion criteria.
Data 2023, 8, 169 3 of 17

Table 2. Research Questions.

Id. Metrics
RQ1 What are the algorithms, methods, and models used to predict credit risk?
Which are the metrics to evaluate the performance of algorithms, methods,
RQ2
or models?
RQ3 What are these models’ accuracy, precision, F1 measure, and AUC?
RQ4 What datasets are used in the prediction of credit risk?
RQ5 What variables or features are used to predict credit risk?
RQ6 What are the main problems or limitations of predicting credit risk?

Figure 1. PRISMA Research Strategy.

Research string:
TITLE-ABS-KEY ((“credit” OR “loan”) AND (“machine learning”) AND (“model”
OR “algorithm” OR “method”) AND (“financial”) AND (“credit risk”)) AND (LIMIT-TO
(PUBYEAR, 2023) OR LIMIT-TO (PUBYEAR, 2022) OR LIMIT-TO (PUBYEAR, 2021) OR
LIMIT-TO (PUBYEAR, 2020) OR LIMIT-TO (PUBYEAR, 2019) ) AND (LIMIT-TO (DOC-
TYPE, “cp”) OR LIMIT-TO (DOCTYPE, “ar”)) AND (LIMIT-TO (SUBJAREA, “COMP”)).

Table 3. Application of inclusion and exclusion criteria.

Inclusion Criteria Exclusion Criteria # %

Article of conference 2 0.73%
Article of journal 50 18.18%
Article duplicated 77 28.00%
Not related 15 5.45%
Review article 1 0.36%
Without access to the full document 57 20.73%
Without rank in Scimagojr 73 26.55%
Total 275 100.00%

Research Strategy
To determine the importance of studies, we assess that they include relevant conclu-
sions or results; attributes or features of datasets; descriptions of the proposed model or
algorithm; the metrics with which the models were evaluated; preprocessing techniques;
identified problems or limitations; and future studies. We also consider when the article
Data 2023, 8, 169 4 of 17

includes more than one set of data or experiments; we select one of them to present the
metrics considering the most relevant in terms of ACC, AUC, or another metric in the event
the indicated ones are not used. According to our criteria and in the cases which it applies,
we decided on the German Dataset, which is the dataset of the University of California
Irvine (UCI), considering that it is imbalanced [16], of frequent use, and it will allow us to
compare results between investigations that include it.
The main limitation when carrying out a systematic review is bias, and considering
how the decisions of researchers influence the application of the method framed in expe-
riences and previous knowledge. For example, the choice of topic, choice of electronic
resources, proposal of research questions, methodology for data collection, and their eval-
uation. We have tried to meticulously follow the PRISMA method, taking into account
the application of the most appropriate criteria and procedures in the construction of
this document.

3. Current Research
The demand for online credit generates considerable information, with which, when
analyzed using BIG DATA [17], designs new products, machine learning models, and
credit risk assessment methods [18]. Consequently, in scenarios of increased demand,
credit risks also escalate considerably, in a non-linear manner, considering the level of risk,
rate, and terms of credit [19]. In the same manner, there is an expectation of an increase
in fraud in the following years [20]. Another problem to consider is the consistency of
the information recorded at the different stages of the process, such as sales data [21],
cultural variables, environmental data [22], macroeconomics [23], innovation capacity
management and development, exchange rate evolution, Gross Domestic Product (GDP)
growth trends [23,24], economic activity, and experience [25].
The relevant problems are addressed by various research papers, using different ML
approaches for the respective interpretations and decision-making [26]. However, there are
also difficulties with the implemented models [27], which generally follow the black box
model; that is, to predict, for example, the good and bad payers [28–30]. These models have
presented problems, especially in difficult times, such as “the financial crisis of 2008” [1,31],
since financial institutions focus on loans that generate the most income, being, therefore,
of higher risk due to payment defaults [19,22]. Automatic evaluation models, based on
credit data, could confuse good paying customers for bad ones [20], and apply penalties on
possible benefits [32]. The low explainability of advanced non-linear ML models is slowing
down their implementation [33]. The challenge is in the development of Explainable ar-
tificial intelligence (XAI), whose objective is to provide predictive models with inherent
transparency, especially in complex cases [34,35]. In that sense, one could use Shapley
Additive exPlanations (SHAP) or the Generalized Shapley Choquet integral (GSCI) to
expose the parameter dependency [36,37], and a model interpretable payment risk forecast
from a penalized logistic tree to enhance the performance of Logistic Regression (LR), and
LR + Slack Based Measure (SBM) [38,39]. The MLIA model and variable logistic regression
coefficient more intuitively reveal the contribution of a variable to the predicted out-
come [40]. The “non-payment” problem is important because it could generate significant
losses for financial entities [41,42].
Here, the challenge of machine learning is to consider the existing multicollinearity
in the input data [43,44] where there is a high correlation of variables and some that is
not useful for classification [2]. This imbalance in the data actually used, with probable
overfit [20], could generate biases in machine learning [45,46], causing chaotic reputation
management, and malicious or criminal deception [47]. In other words, the challenge is
to determine the effective, relevant features [48], for example, for the training of neural
networks (NNs) (which is performed end-to-end by interactions). These are additional con-
straints with desirable features known a priori in order to reduce the number of interactions
and prioritize smoothness; they are factors of explanatory interest, in the domain, control,
and generative modeling of features [49]. Other authors recommend the use of genetic
Data 2023, 8, 169 5 of 17

algorithms (GAs) to guide training, with data sequences that have the best result [50]; the
use of hive intelligence (HI) is also highlighted for this purpose [51–53]; Boost Category
models (BCat) such as Adaboost (ADAB), XGBoost (XGB), LightGBM (LGMB), and Bagging
(BAG) [30,40,54–56]; multi-classification (MC) and information fusion models (MIFCA) [44];
there is also noise removal using fuzzy logic (FL) and contribution to the identification of
main attributes [28,37,57]. It is worth noting the possibility to evaluate the interaction of
borrowers within their supply chain to enrich predictive models [17,58]. The use of images,
interviews, text and social information, and interaction with mobile technology would
give the credit risk assessment a multidimensional and multi-focus characteristic [15,59,60];
this indicates the inclusion of integrated accounting information with statistical variables
of profitability, liquidity, asset quality, management indices, capital adequacy, efficiency,
SCORECARD scorecard and the maximization of the internal rate of return (IRR), risks of
the industry, and GDP [1,23].
Some authors maintain that the most relevant characteristics are gender, educational
level, mortgage credit, microfinance, debt balance, and days past due [61]. Other authors
maintain that the most relevant variables are the days of default, especially those greater
than 90 days, to determine non-payment behavior and consider that discriminatory vari-
ables such as gender, age, and marital status should not be considered [55,61]. Consequently,
the challenge of validating the quality of the features arises [39,62]. For this part, [17] main-
tains that the number of influential variables for risk assessment has increased, and the
linear and non-linear time series relationships have increased their complexity.
There are also methods to address the imbalance problem: Random Undersam-
pling (RUS), Near Miss (NMISS), Cluster Centroid (CC), Random Oversampling (ROS),
Adaptive Synthetic (ADASYN), K-Nearest Neighbor (KNN) SMOTE (KN-SMOTE),
Synthetic Minority Oversampling Technique (SMOTE), Borderline-Smot (B-SMOT),
and Smotetomek (SMOTE-T) [63]. Other authors propose the use of CS-classifiers [64],
and KFold [29,55]. However, other authors propose considering imbalance and miss-
ing data as characteristics to take into account in the [54,56], evaluation. As an initial
part of the model evaluations in the experiments, the importance of optimizing the
hyperparameters highlight using, for example, GA [15], K-Fold CV [38], random search
(RS) [20], grid search (GS) [57,63], and other methods [56].
In Table 4, we summarize the challenges in credit risk prediction and the ML meth-
ods and techniques proposed by the authors to address them. The main challenge is
high uncertainty. The authors propose various classification models, including Boosted
category models, neural networks, deep learning enhanced with fuzzy logic, genetic
algorithms, and hive intelligence. For the low explainability of the results, the authors
propose applying Explainable artificial intelligence, Shapley Additive exPlanations,
Generalized Shapley Choquet integral, and MLIA. To address the complexity of ML
models, the authors propose optimizing the hyperparameters of the models supported
with KFold CV, genetic algorithms, and grid search. For the multivariate origin of the
data, the authors propose applying BIG DATA to take advantage of its prominent vol-
ume characteristics and its unstructured nature. To address the natural characteristics
of unbalanced data, the authors propose the application of SMOTE, RUS, ROS, KFold,
and ADASYN.

Table 4. Challenge of Credit Risk Prediction.

It. Challenges ML Methods & Techniques # Author

1 Uncertainty NN, DL, BCAT, MC, MIFCA, FL, GA, HI 28 [2,15,17,19,20,28,30,36–58]
2 Explainability XAI, SHAP, GSCI, MLIA 18 [1,19,20,22,27–40]
3 Complexity GA, K-Fold CV, RS, GS 9 [15,17,20,23,24,38,56,57,63]
4 Multivariate Data BIG DATA 9 [1,15,17,23–25,59–61]
5 Unbalanced Data SMOTE, RUS, ROS, KFold, CS, ADASYN 7 [20,29,54–56,63,64]
Data 2023, 8, 169 6 of 17

4. Results
4.1. Answer to RQ1: What Are the Algorithms, Methods, and Models Used to Predict Credit Risk?
In their research to forecast credit risk, the authors use ML models: 72.76% non-
assembled (N-Ass) and 27.24% assembled (Ass), which are shown in Table 5.

Table 5. Family of algorithms, methods, and models.

# %
It. Family
Ass N-Ass Total Ass N-Ass Total
1 Boosted Category 36 46 82 11.96% 15.28% 27.24%
2 Collective Intelligence 7 - 7 2.33% 0.00% 2.33%
3 Fuzzy Logic 10 - 10 3.32% 0.00% 3.32%
4 NN/DL 8 28 36 2.66% 9.30% 11.96%
5 Other Model 3 10 13 1.00% 3.32% 4.32%
6 Traditional 18 135 153 5.98% 44.85% 50.83%
Total 82 219 301 27.24% 72.76% 100.00%

For better presentation we group them into the following families: Boosted Category,
the models related to the Boosted algorithm; Collective Intelligence, models related to
collective or swarm intelligence including Ant Colony Optimization (ACO), Bat Algorithm
(BAT), and Particle Swarm Optimization (PSO); Fuzzy Logic, models related to Fuzzy Logic
including Clustering-Based Fuzzy Classification (CBFC); NN/DL, models related to neural
networks or Deep Learning (DL) including Back Propagation Neural Network (BPNN),
Artificial Neural Network (ANN), Multilayer Perceptron (MLP), Wide and Deep Neural
Networks (Wide&Deep), Gated Recurrent Unit (GRU), Geometric Deep Learning (GDL),
Graph Neural Networks (GNNs), Deep Genetic Hierarchical Network of Learners (DG),
and Convolutional Neural Networks (CNNs); Other Models, for the models not cataloged;
and Traditional, for the models cataloged but not related to previous models including
Decision Tree (DT), Decision Tree C4.5 (C4.5), Classification And Regression Tree (CART),
K-Means (KM), Linear Discriminant Analysis (LDA), Non-Linear Logistic Regression (NLR),
Naive Bayes (NB), Random Forest (RF), Random Tree (RT), Support Vector Machine (SVM),
and Sequential Minimal Optimization (SMO). Of the total models used, 50.83% correspond to
the Traditional model family, 27.24% to the Boosted Category, and 11.96% to NN/DL.
Analyzing the groups separately corresponding to N-Ass as shown in Figure 2, the
Category Boosted family was used in 21% of the studies, NN/DL has a use rate of 12.8%,
Traditional has a use rate of 61.6%, and Other Models have a use rate of 4.6%.

Figure 2. Non-Assembled Models.

In Figure 3, the Category Boosted family was used 43.9% of the time, NN/DL has a
use rate of 9.8%, Traditional has a use rate of 22%, Other Models have a use rate of 3.7%,
Fuzzy Logic has a use rate of 12.2%, and Collective Intelligence is used in 8.5% of the total.
These results will demonstrate that N-Ass models are mostly used in credit risk prediction.
However, the authors use these as a baseline to compare them with Ass models generated
by nesting N-Ass models and improving them using fuzzy logic and hive intelligence.
Data 2023, 8, 169 7 of 17

Figure 3. Assembled Models.

4.2. Answer to RQ2: Which Are the Metrics to Evaluate the Performance of Algorithms, Methods,
or Models?
We collected the metrics used by the researchers in their articles, taking into account
that for the cases in which they evaluate more than one dataset and more than one model
is applied, a pair is searched, looking forthe best ACC and AUC values, or another value in
the cases where these are not used, as shown in Figure 4.

Figure 4. Best Models with family and author.

Data 2023, 8, 169 8 of 17

From this simplification, the authors propose 48% assembled models and 52% non-
assembled models.
Of the total assembled models, the Boosted Category has 21%; Collective Intelligence
has 8%; NN/DL has 8%, Traditional has 8%, and Fuzzy Logic has 4%. Of the non-assembled
models, the Boosted Category makes up 25%; Traditional is 21%; and NN/DL is 6%.
In these models, the metrics used by the authors are dividied into AUC with 16%,
ACC with 14%, F1 measure with 11%, others with 11%, Precision with 10%, Recall with
9%, True Positive Rate (TPR) with 7%, True Negative Rate (TNR) with 6%, Geometric
Mean (GMEAN) with 4%, Kolmogorov–Smirnov (KS) with 3%, Brier Score (BS) with 3%,
GINNI Score (GINNI) with 2%, and Root Mean Squared Error (RMSE), KAPPA coefficient
(KAPPA), and Mean Absolute Error (MAE), whose group participation is 2%; the details
are shown in Table 6.
These results could demonstrate that the most-used metrics for credit risk prediction
are AUC and ACC since they allow for the comparison of different models. However, AUC
is prioritized because the distribution of the classes does not influence it and has better
behavior when using unbalanced data.

Table 6. Metrics.

It. Metrics # % Author

1 AUC 34 16.11% [1,2,11,16,17,20,24,25,27,28,30,32–43,46,50,54–58,61–64]
2 ACC 30 14.22% [3,11,15,18,25–32,35,36,36,37,39,44,46,48,50–53,55,57,58,60–63,65]
3 F1 24 11.37% [11,17,18,24,27,29,30,32,36,37,39,41,42,44,48,51,56,58,60–65]
4 Precis. 22 10.43% [3,11,17,18,24,27–30,32,36,39,41,42,44,46,58,60–62,65]
5 Recall 19 9.00% [11,24,27–30,36,39,41,42,44,46,58,60–63,65,66]
6 TPR 14 6.64% [16,18,24,25,31,32,35,37,45,50,51,55,57,65]
7 TNR 13 6.16% [16,25,31,32,35,37,39,45,50,51,55,57,65]
8 GMEAN 9 4.27% [20,31,35,39,45,48,50,63,64]
9 KS 7 3.32% [24,36,38,39,43,55,56]
10 BS 6 2.84% [33,37,38,55,57,62]
11 GINNI 5 2.37% [2,24,38,43,46]
12 RMSE 2 0.95% [53,67]
13 KAPPA 1 0.47% [51]
14 MAE 1 0.47% [67]
15 Other 24 11.37% [2,14,23,25,28,33,35,36,38,41,43,45,46,51,53,54,57,59–62,64,65,67]
Total 211 100.00%

4.3. Answer to RQ3: What Are These Models’ Accuracy, Precision, F1 Measure, and AUC?
We listed the values of the five metrics most used by the authors in their research:
AUC, ACC, F1 measure, Precision, and Recall, as shown in Table 6. Furthermore, we have
taken the values in each case according to the tuple defined in the question. To compare
experiments, the characteristics of the dataset and metric to be evaluated should correspond.
Below, we show only the metrics’ values the authors used and evaluated in their research
in Table 7. If the metrics have an empty value, the authors do not consider them in their
experiment design.

Table 7. Metrixs author.

Metrics’ Values
It. Dataset Author
ACC Precision F1 Recall AUC
1 UCI Taiwan [29] 85.00 70.00 50.00 62.00 -
2 UCI German [63] 83.50 82.10 84.40 86.80 91.00
3 UCI German [25] 82.80 - - - 91.20
4 UCI German [50] 81.18 - - - 85.38
5 UCI German [51] 76.60 - 84.74 - -
Data 2023, 8, 169 9 of 17

Table 7. Cont.

Metrics’ Values
It. Dataset Author
ACC Precision F1 Recall AUC
6 UCI German [28] 75.80 54.20 - 82.00 85.90
7 UCI German [57] 74.90 - - - 75.80
8 UCI German [16] - - - - 79.40
9 Lending Club [32] 92.60 97.90 92.20 - 97.00
10 Lending Club [65] 84.40 88.99 91.42 93.98 -
11 Lending Club [30] 76.10 75.98 75.95 76.35 76.80
12 Lending Club [48] 88.77 - 94.14 - -
13 Lending Club [31] 74.90 - - - -
14 Lending Club [35] 64.00 - - - 71.70
15 Lending Club [36] 63.60 85.30 73.50 64.50 67.40
16 Lending Club [46] - 18.25 - 46.88 63.63
17 Lending Club [56] - - 2.72 - 75.86
18 K Prosper [3] 78.50 54.70 - - -
19 K Prosper [17] - 79.00 71.00 65.00 80.00
20 K Give Me [61] 88.30 78.50 77.60 76.70 93.30
21 RenRenDai [37] 93.35 - 73.12 - 82.64
22 BR [55] 96.68 - - - 89.63
23 AVG Used [11] 92.80 31.60 33.40 35.50 82.80
24 AVG Used [64] - - 91.89 - 96.19
25 UCI Austr... [26] 97.39 - - - -
26 Tsinghua [52] 91.23 - - - -
27 Tsinghua [62] 77.20 75.90 77.54 79.38 85.01
28 Private Data [18] 98.34 100.00 96.00 - -
29 Private Data [53] 98.00 - - - -
30 Private Data [60] 97.80 98.90 98.70 98.90 -
31 Private Data [15] 90.10 - - - -
32 Private Data [27] 84.29 82.63 84.68 86.83 84.29
33 Private Data [44] 84.15 82.15 83.40 84.68 -
34 Private Data [58] 83.00 83.50 83.00 83.00 83.30
35 Private Data [39] 77.49 79.87 85.59 92.18 79.00
36 Private Data [24] - 87.15 84.56 83.91 83.59
37 Private Data [54] - - - - 46.10
38 Private Data [1] - - - - 75.40
39 Private Data [38] - - - - 85.68
40 Private Data [33] - - - - 93.39
41 Private Data [34] - - - - 93.00
42 Private Data [42] - 42.81 52.00 67.01 78.00
43 Private Data [40] - - - - 71.32
44 Private Data [2] - - - - 91.40
45 Private Data [41] - 88.00 88.00 88.00 93.00
46 Private Data [43] - - - - 77.56
47 Private Data [20] - - - - 95.50

Considering that there are experiments in which the same dataset is used, we can
compare their prediction capabilities. This occurs in the case of the UCI German Dataset, in
which the XGB + DT model has an ACC of 84 [63], against the LR models [28], and Random
Forest (RF) + C4.5 [16]. Other less-used datasets on which we can compare the metrics
are the Tsinghua—Pekin U RESSET database and the Kaggle Prosper dataset, as shown
in Table 7. It is essential to indicate that the Lending Club dataset is possible to compare;
however, it is necessary to consider the different date ranges for the investigations that the
authors used [35,36].
Data 2023, 8, 169 10 of 17

4.4. Answer to RQ4: What Datasets Are Used in the Prediction of Credit Risk?
The datasets used by the authors can be divided into 53.85% public and 46.15% private,
seeking mainly in the first case to validate new models. To be able to compare them with
experiments, we show the data in Figure 5—private datasets used to extract knowledge by
revalidating existing models in real scenarios. In the public group, the most used is the UCI
German dataset with a usage of 15.38%, possibly due to its characteristics [16]; the second
most used is the Lending Club platform, which is a P2P loan platform used in 15.38% of
the studies. Some authors in their experiments validate both public and private data, and
Ass and N-Ass models, and determine their behavior in different scenarios.
The financial industry needs machine learning tools to support credit risk prediction,
as many experiments with private datasets demonstrate. However, since these use sensi-
tive data, their access is limited, which could slow down community efforts to improve
prediction using actual cases.

4.5. Answer to RQ5: What Variables or Features Are Used to Predict Credit Risk?
The authors propose many variables, using different methods to identify the vari-
ables with the best predictive capacity. GA, FL, hive intelligence, statistical methods, and
functions are used to determine the correlation; in Table 8 we display the details.
To simplify the analysis, we have grouped the proposed variables into Demographic,
which has a 54.09% share; Operation with 29.18%; Payment behavior with 7.62%; External
factors with 6.69%; Unstructured data with 1.30%, and Transaction with 1.12%, as shown in
Table 9.
The preference in the use of demographic variables for the prediction of credit risk
would have to be explained because these can represent the behavior, preferences, and
socioeconomic profile of the client or the segments to which they belong; their inclusion
contributes positively to the models, but it is not sufficient. It must be accompanied by
Payment behavior variables, characteristics of the operation, and environmental variables
that could influence the results.

Figure 5. Dataset used.

Data 2023, 8, 169 11 of 17

Table 8. Features.

It. Features Group Feature # %

1 Demographic External Debt Value/historical 27 5.02%
2 Demographic Domestic Debt Value/historical 27 5.02%
3 Operation Loan value 24 4.46%
4 Demographic Average/Total revenue 20 3.72%
5 Demographic Residence/Registered Assets 19 3.53%
6 Demographic Economic Activity/Experience 18 3.35%
7 Demographic Family Income 18 3.35%
Days in arrears/Range Days in
8 Payment behavior 17 3.16%
arrears
9 Operation Historical use of debt 16 2.97%
10 Operation Destination of the Credit/Purpose 16 2.97%
11 Operation Interest Rate 16 2.97%
12 External factors Debt Profitability 16 2.97%
13 Demographic Total Debt/Income/DTI 15 2.79%
14 Demographic Gender/Sex 14 2.60%
15 Demographic Risk Segment/Buro Rating/Score 14 2.60%
16 Demographic Age/Date of Birth 13 2.42%
17 Operation Checking/Savings Account 13 2.42%
18 Operation Credit Line Limit 13 2.42%
19 Demographic Civil Status 12 2.23%
20 Demographic Mortgage Debt 12 2.23%
21 Operation Monthly Fees 12 2.23%
22 Payment behavior Collection status 11 2.04%
23 Payment behavior Unpaid Installment Number 11 2.04%
24 Demographic Financial maturity 9 1.67%
25 Demographic Residence type 9 1.67%
26 Demographic Fee value 9 1.67%
27 External factors Inventory turnover 9 1.67%
28 Demographic Labor Old 7 1.30%
29 Demographic Education Level 7 1.30%
30 Others Others 114 21.21%
Total 538 100.00%

Table 9. Features Group.

It. Features Group # %

1 Demographic 291 54.09%
2 Operation 157 29.18%
3 Payment behavior 41 7.62%
4 External factors 36 6.69%
5 Unstructured data 7 1.30%
6 Transaction 6 1.12%
Total 538 100.00%

4.6. Answer to RQ6: What Are the Main Problems or Limitations of Predicting Credit Risk?
In the reviewed articles, the authors state limitations or problems that they have faced
during the experiments, although in each case there are nuances. We have grouped them
into the following: Representativeness of reality, seen in 32% of the studies, refers to the
fact that many of the existing variables do not reflect the true nature of the information.
Unbalanced data seen in 28%, refers to the fact that, according to some authors, the usage of
highly unbalanced data significantly reduces the performance of the models. Inconsistency
in information recording is noted in 17%, where reference is made to the fact that the
existing records have been entered with errors, bias, and noise that generates the need to
apply cleaning techniques, with the risk of losing certain information. Lack of ability to
explain the proposed results in 13% refers to the explainability limitation that most robust
Data 2023, 8, 169 12 of 17

ML models have. Availability of information and centralized processing in 6% refers to

the need to process information centrally, which can generate additional losses, noise, and
delays. Adaptability in processing structured and unstructured information in 4%, refers
to the need to process structured and unstructured data within the operation process. We
show the results in Table 10.

Table 10. Limitations.

It. Limits Identified # %

1 Representativeness of reality 39 31.71%
2 Unbalanced data 35 28.46%
3 Inconsistency in information recording 21 17.07%
4 Lack of ability to explain the proposed results 16 13.01%
5 Availability of information and centralized processing 7 5.69%
6 Adaptability in processing struct. and unstruct. information 5 4.07%
Total 123 100.00%

For credit risk prediction models, the difficulties center on the consistency of available
information. Furthermore, the capacity of the models to process it is a limitation, since in
this industry, its fundamental nature corresponds to unbalanced data.

5. Additional Findings
During the development of this RSL, we identified preprocessing techniques that the
authors refer to during their experiments.
The techniques most used by the authors for estimating the hyperparameters are KFold
in 58.33% of the studies and Grid Search in 22.22%. We display the details in Table 11.
The most-used algorithms to mitigate the problem of imbalance in the datasets are
SMOTE at 29.55%, followed by KFold with 20.45%, RUS at 11.76%, and ROS similarly at
11.36%. We show the detail in Table 12. Also used are ADASYN, some variants of SMOTE
like B-SMOTE, SMOTE-T, adapted classification algorithms like KN-SMOTE, Under-
Bagging, and techniques to identify missing values such as NMISS, CC, CS-Classifiers, and
RESAMPLE.
Credit risk prediction can be schematized as a classification problem with unbalanced
samples [20]; in that sense, the authors’ preprocessing techniques can be considered the
baseline for new research.

Table 11. Techniques for determination of hyperparameters.

It. Method # % Author

1 KFold CV 21 58.33% [1,2,15,18,26,28,29,31,33,35,38,40,41,43,45,46,50,55,59,62,67]
2 Grid Search Method 8 22.22% [11,15,16,44,48,56,57,63]
3 LightGBM Bayesian Optimization 2 5.56% [20,56]
4 Genetic Algorithm 2 5.56% [26,52]
5 Random Search 1 2.78% [20]
6 Ant Colony Optimization 1 2.78% [53]
7 Other 1 2.78% [65]
Total 36 100.00%

Table 12. Dataset balancing techniques.

It. Method # % Author

1 SMOTE 13 29.55% [2,11,15,20,25,30,32,35,36,44,45,63,64]
2 KFold 9 20.45% [14,16,24–26,29,50,55,57]
3 ROS 5 11.36% [2,20,35,45,63]
4 RUS 5 11.36% [2,20,45,63,64]
5 ADASYN 2 4.55% [35,63]
Data 2023, 8, 169 13 of 17

Table 12. Cont.

It. Method # % Author

6 SMOTEBoost 2 4.55% [20,64]
7 B-SMOT 1 2.27% [63]
8 CC 1 2.27% [63]
9 CS-Classifiers 1 2.27% [64]
10 KN-SMOTE 1 2.27% [63]
11 NMISS 1 2.27% [63]
12 RESAMPLE 1 2.27% [48]
13 SMOTE-T 1 2.27% [63]
14 Under-Bagging 1 2.27% [64]
Total 44 100.00%

6. Discussion
The most widely used ML models to assess credit risk correspond to the Traditional
family, possibly due to their easy implementation. On the other hand, those with the best
prediction results correspond to the Boosted Category, both in the Ass and in the N-Ass
groups. This trend is evidenced in Table 13, where this family obtains 24 evaluations out
of 52 and is constantly growing through recent years. Another trend identified is that
better results are acquired with the N-Ass models [67], for example, in the experiments
which obtained AUC 91.00 with the AdaB + RF model [63] and 91.20 with XGB + DT [25],
respectively. As shown in Table 7 and Figure 4, these results could be explained by gradient-
based optimization features, parallelism, high-volume throughput, and missing values.
The most-used metrics correspond to AUC, ACC, F1 measure, Recall, and Precision; the
authors propose more specialized metrics according to the situation being evaluated. AUC
and ACC in 16.11% and 14.22% of the studies, are mainly due to their ability to measure
the capacity of different types of ML models. In the first case, it does not vary before the
transformation by normalization, which allows analyzing unbalanced data with a high
cost of classification; in the second case, it works better with balanced data, and that of
easy explanation.

Table 13. Model trends.

It. Family 2019 2020 2021 2022 2023 Total

1 Boosted Category 4 4 5 10 1 24
2 Traditional 4 1 5 4 1 15
3 NN/DL 1 1 2 2 1 7
4 Collective Intelligence 2 2 4
5 Fuzzy Logic 1 1 2
Total 9 9 12 18 4 52

Likewise, of the experiments carried out, the most significant databases used are
53.85% public datasets, while 46.15% correspond to private ones; the first serves to evaluate
the predictive capacity of the new models proposed by the authors, comparing the results
with previous experiences and the second to generate new knowledge through its applica-
tion in the real world. In the experiments, the authors identify as the main problem in the
datasets for the design of ML models the misrepresentation of reality due to possible bias,
inconsistency, or error when recording the information. The second problem corresponds
to the imbalance of the data, which can impair the excellent performance of the models. To
face this problem, the SMOTE algorithm is mainly used, and for the optimization of the
hyperparameters, the Kfold CV and Grid Search Method techniques are utilized. However,
some authors propose hive intelligence [53] and genetic algorithms [26,52] to guide opti-
mization. Finally, the most-used variables that best represent the intention and ability to
pay, which in turn originate credit risk, correspond to the Demographic, Transaction, and
Data 2023, 8, 169 14 of 17

Payment behavior features. These encompass the main characteristics expected to predict
it; see Table 8. However, the corresponding external features and unstructured data must
be considered, bearing in mind the former, the influence in the hyperconnected world, the
growing development of DDI, and the processing capacity of BIG DATA.

7. Conclusions and Future Research

In this systematic review article of the literature on credit risk prediction using ML,
we reach the following conclusions:
• The Boosted Category is a family of ML models being investigated. They are the most
used in Ass and N-Ass situations, highlighting the XGB model, with the tendency
being its use in Ass. This category in the experiments obtained better results than
other models due to its ability to process categorical variables—numerical, with noise,
missing, and unbalanced data—and applying regularization could avoid overfitting.
However, since they are complex models, they are challenging to interpret and are not
very tolerant of applying atypical values.
• The five most-used metrics are AUC, ACC, Recall, F1 measure, and Precision, although,
in practice, the problem must considered when choosing the most appropriate metrics.
However, AUC stands out for its ability to not be influenced by the distribution of
classes and preferable behavior when processing unbalanced data.
• Public datasets are more utilized; of this group, the commonly used are UCI German
Dataset and Landing Club Dataset. Their main use is to validate the behavior against
other models under the same conditions. Private datasets generate knowledge from
the application to a specific situation.
• For the evaluation of credit risks through ML, demographic variables are mainly used,
which represent behavior, preferences, socioeconomic profile, and operations that
represent the characteristics of the financial product acquired. However, this infor-
mation is insufficient and is complemented by external variables and those related to
unstructured data such as images, video, or others generated from hyperconnectivity,
which is supported by DDI and BIG DATA development and processing.
• The main problems are the representativeness of reality, the imbalance of data for the
training, and the inconsistency in recording information. All cases arise due to biases,
errors, or problems in recording information.
• The most widely used method to solve the imbalance problem is SMOTE to optimize
the performance of ML models, while the methods to determine the hyperparameters
are KFold-CV and Grid Search to guide their optimization.
The credit risk prediction contribution corresponds to the stage where the credit origi-
nates. In this sense, we propose to extend the application of ML to precise credit datasets
from specialized companies, including these models in other processes, such as credit
collection and customer retention, considering the regulatory impositions governments
are implementing to mitigate possible losses in the industry. Credit risk prediction can be
enhanced with BIG DATA analysis, especially on unstructured data such as images, text,
writing, sentiment, and hive intelligence, to assess adaptability to changing scenarios [17].
Finally, and in the same sense, including variables that represent the state of the envi-
ronment could contribute to reducing uncertainty in this sector in the face of unexpected
external events.

Author Contributions: Conceptualization, J.P.N. and J.A.H.; methodology, J.P.N.; validation, J.P.N.,
L.A.R. and J.A.H.; formal analysis, J.P.N. and J.A.H.; investigation, J.P.N.; resources, J.P.N.; writ-
ing—original draft preparation, J.P.N.; writing—review and editing, J.P.N., L.A.R. and J.A.H.; visual-
ization, J.P.N.; supervision, J.A.H.; project administration, J.P.N. All authors have read and agreed to
the published version of the manuscript.
Funding: This research received no external funding.
Institutional Review Board Statement: Not applicable.
Data 2023, 8, 169 15 of 17

Informed Consent Statement: Not applicable.

Data Availability Statement: Not applicable.
Conflicts of Interest: The authors declare no conflict of interest.

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