EDA CREDIT ASSIGNMENT

Presented by:
Shakti Singh
Introduction to Exploratory Data Analysis

• “While fraud reduction is a common goal for banks and financial institutions, analytics
can be used to manage risk instead of simply detecting fraud” (Janaha, Data
Analytics in banking and Financial Services 2023).
• “Analytics can be used to identify and rate individual customers who are at risk of
fraud and then apply different levels of monitoring and verification to those accounts.
Analyzing the risk of the accounts allows banks and financial institutions to know
what to prioritize in their fraud detection efforts” (Janaha, Data Analytics in banking
and Financial Services 2023).
• “With the rise of computing power and new analytical techniques, banks can now
extract deeper and more valuable insights from their ever-growing mountains of
data.” Moreover, “The recent dramatic increases in computing power have allowed
banks to deploy advanced analytical techniques at an industrial scale” (Dash et al.,
Risk analytics enters its prime 2017).
Introduction to Exploratory Data Analysis

• “Machine-learning techniques, such as deep learning, random forest, and XGBoost,

are now common at top risk-analytics departments” (Dash et al., Risk analytics enters
its prime 2017).
• “The new tools radically improve banks’ decision models. And techniques such as
natural-language processing and geospatial analysis expand the database from
which banks can derive insights” (Dash et al., Risk analytics enters its prime 2017).
• “This means that risk teams can increasingly measure and mitigate risk more
accurately and faster” (Dash et al., Risk analytics enters its prime 2017).
• “Banks that are fully exploiting these shifts are experiencing a “golden age” of risk
analytics, capturing benefits in the accuracy and reach of their credit-risk models and
in entirely new business models” (Dash et al., Risk analytics enters its prime 2017).
Introduction to the Case Study

• “The loan providing companies find it hard to give loans to the people due to their
insufficient or non-existent credit history. Because of that, some consumers use it to their
advantage by becoming a defaulter” (upGrad, Credit EDA Assignment 2023).
• “When the company receives a loan application, the company has to decide for loan
approval based on the applicant’s profile” (upGrad, Credit EDA Assignment 2023).
• “This case study aims to identify patterns which indicate if a client has difficulty paying
their instalments which may be used for taking actions such as denying the loan, reducing
the amount of loan, lending (to risky applicants) at a higher interest rate, etc.” (upGrad,
Credit EDA Assignment 2023).
• Problem Statement: “The company wants to understand the driving factors (or driver
variables) behind loan default, i.e. the variables which are strong indicators of default.
The company can utilise this knowledge for its portfolio and risk assessment” (upGrad,
Credit EDA Assignment 2023).
Procedure followed from the Beginning
• All the warning and necessary libraries were imported such as import warnings,
numpy, pandas, matplotlib.pyplot and seaborn.
• Then the CSV file called ‘application_data.csv’ was imported along with CSV file
‘previous_application.csv’.
• ‘application_data.csv’ was converted to a pandas data frame and stored in a variable
and same was done for ‘previous_application.csv’.
• First analysis was done on current application or application data set and then later it
was done on the previous application dataset.
• File was read using the head( ) and tail( ) function
• After that the columns were checked, and info was printed.
• Then the data set was checked for null values.
Null Value Treatment
• Then the null values were converted to a percentage format.
• Columns that were having null values more than 35 percent were removed from the
dataset.
• Then null values that were less than 13 to 20 percent that were missing in the dataset
were identified labeled as minor_missing_values.
• Then the unique values of the columns were identified using the nuinque ( ) function
and was determined that they were of categorical nature.
• Some unnecessary columns were dropped that were not needed for the analysis.
• Then data type correction was performed making columns that are of object type or
categorical or numerical type and were converted accordingly.
• Columns having negative values were converted to positive where it was required.
Data Binning

Inference: The graphs shows that range of the amount of

money borrowed by males and females. In this case females
are the major borrowers. The most borrowed amount of money
by both male and female falls in the range of 250000 to 500000.
Outlier Identification and Suggested Treatment
Box Plot for CNT_CHILDREN

Inference: We can
clearly see that
there are many
outliers present,
we can use
median or mode
to impute the
outliers because
mode or median
will give an
accurate
representation of
the whole dataset.
Box Plot for AMT_INCOME_TOTAL
Inference: We can
observe that there
are outliers present
here as well. We
can use median or
mode to impute the
outliers because
mode or median will
give an accurate
representation of
the whole dataset
Box Plot for AMT_CREDIT

Inference: There are

outliers present as well. We
can use median or mode to
impute the outliers
because mode or median
will give an accurate
representation of the whole
dataset
Box Plot for YEARS_EMPLOYED

Inference: We can see

that there is an outlier
here as well which is at
1000 years realistically
it is not possible. we
can use median or
mode to impute the
outliers because mode
or median will give an
accurate
representation of the
whole dataset
Box Plot for AMT_REQUIRED_CREDIT_BUREAU_QRT

Inference: There is an
outlier here as well. We
can use median or mode
to impute the outliers
because mode or median
will give an accurate
representation of the
whole dataset
Heat Map of Target Variable Zero
Inference: We can see clearly
that our upper matrix is
symmetrical and the amount
credit, and amount goods
price have the highest positive
correlation 0.99 which means
they are positively linearly
correlated. However, the ext.
source 3 and amount total
income have a negative
correlation. Additionally, the
amount good price and
amount annuity are also
presenting with a good
correlation.
Heat Map of Target Variable Zero
Inference: We can see from
the above heat map that the
amount credit and amount
goods price have highest
positive correlation which
shows the positive linear
relation of the two variables.
However, ext. source 3 and
amount income total have a
negative correlation. This just
shows that two variables that
have negative correlation are
not necessarily dependent on
each other.
Numerical Univariate Analysis
Box Plot comparing
YEARS_BIRTH by using
clients from dataset of Target
0 and 1

Inference: From the box plot

we observe that clients
without payment difficulties
are of the age 35 to 55 years ,
And clients with payment
difficulties are between ages
of 32 to 48 years. Also, the
clients that do not have
difficulty paying have a higher
IQR.
Numerical Univariate Analysis
Box Plot comparing
YEARS_EMPLOYED by
using clients from dataset of
Target 0 and 1

Inference: The box plot shows

that clients without payment
difficulties have been
employed between 2 to 9
years whereas, clients with
payment difficulties have been
employed between 2 to 7
years.. Also, the clients that
do not have difficulty paying
have a higher IQR.
Numerical Univariate Analysis Box Plot comparing
AMT_GOODS_PRICE: clients
from dataset of Target 0 and 1
We can see that clients who
have not had difficulty paying
the loans have been granted
a lower price when compared
to the clients that have had
difficulties in making the
payments. To put it numbers,
clients that didn't have
difficulties they have been
granted the loan at a low cost
of .25 to 1.25 whereas for
clients that have had
difficulties they have been
granted also similar rates of
interest. Now this can be a
result of data not being clean
as expected but generally
people with payment
difficulties are not granted
loans at such low percentage
and if they are granted, they
Numerical Univariate Analysis
Box Plot comparing
YEARS_ID_PLUBLISHED
and clients from dataset of
Target 0 and 1

It is an interesting
observation here one can
see that clients that have
been paying regularly they
have moved more
frequently and clients that
have had problems with
payment have moved less
often.
Numerical Univariate Analysis
Box Plot comparing
AMT_ANNUITY and clients
from dataset of Target 0 and
1

We can clearly observe

that both clients with and
without difficulties have
almost the same Annuity
but there is a difference in
their IQR, clients that have
had difficulties have a
higher IQR when compared
to clients that haven't had
problems.
Categorical Univariate Analysis
Count Plot comparing
CONTRATC_TYPE and clients from
dataset of Target 0 and 1

Both the client base people

with difficulty or without
have taken more cash
loans rather than the
revolving loans. These
depend on many factors
such as the income of the
populous that have the
greatest number of people
in that category or their
education.
Categorical Univariate Analysis
Count Plot comparing
CONTRATC_TYPE and
clients from dataset of Target
0 and 1

An interesting observation,
Males in both the
categories have defaulted
less than the females.
However, the number of
females that have taken a
loan is also more than
males.
Categorical Univariate Analysis
Count Plot comparing
EDUCATION_TYPE and
clients from dataset of Target
0 and 1

Here we can see that most

of the population or the
database has a
secondary/secondary
special education, and this
could be a driving factor
that we were seeing earlier
with people taking more
cash loans rather than
revolving loans.
Categorical Univariate Analysis
Count Plot comparing
HOUSING_TYPE and clients
from dataset of Target 0 and 1

Both the categories of

customers have their own
houses. But we can also
see that people with
difficulties are way less
than people without
difficulties, which is good
news. As less defaulters
are present, and bank can
make recovery of their
money by asking the
defaulters to keep their
houses as collateral.
Categorical Univariate Analysis

Count Plot comparing

OCCUPATION_TYPE and
clients from dataset of Target
0 and 1
Categorical Univariate Analysis
We can see in the count plot OCCUPATION_TYPE in previous slide that in both categories that is
people who have difficulty paying the loans and people who don't have difficulty paying the labor
class is at the highest because they are mostly dependent on daily wages and seasonal work and
when they don't get paid, they default However, when they do get paid, they tend to pay back
because of the small loan amount has small installment as well. Additionally, we can see that the
sales category has the second highest numbers because they are there in majority as in the
number of people who are in the sales field are comparatively more in numbers. Lastly, we can
see that employees from the IT sector and HR sector are the least people to default as they have
better paying jobs and less need for borrowing money.
Bi-variate Analysis
Scatter Plot on
Years Employed
and Total Income

In this plot we can

observe that
people with
payment problems
are more
consistently in the
low-income group
that may be the
result of the labor
and sales
category. However,
people with less
payment difficulty
are ranging from
low income to high
income.
Bi-variate Analysis
Scatter Plot on
Credit amount and
Goods Price

Here we see the

positive correlation
of amt credit to
goods price in both
the cases.
Bi-variate Analysis
Scatter Plot on
Credit amount and
Annuity

Inference:
People without
payment difficulties
take more credit
for the annuity
Bi-variate Analysis
Count Plot on Contract
Type and Credit Range

Inference:
Here we see that
people from both
the category take
loans of cash type
more than the
revolving loans but
that can be
credited to most
people in Labor
and sales class.
Bi-variate Analysis
Count Plot on Gender and
Credit Range

Inference:
In both categories
females have
taken out more
loans and even the
amount is greater
in both cases in
females.
Numerical and Categorical Bi-variate Analysis
Box Plot on Credit
Amount and
Education Type

Inference: In case of
clients with difficulty
paying the loan, we
can see that people
with higher education
struggled more in
repayment it can be
because of the
situation of job
market and the
amount of loan or
their employment
status. On the other
hand, clients who
don't have payment
difficulty is also
leading with higher
education.
Numerical and Categorical Bi-variate Analysis
Box Plot on Total
Income and Education
Type

Inference:
In both cases there
are numerous
outliers, but
academic degree is
the least in both the
cases because of the
client base of the
dataset which is less.
Numerical and Categorical Bi-variate Analysis
Box Plot on Credit
Amount and
Occupation Type

Inference:
We can observe that
the amount of credit
taken is more in
clients with no
difficulties and
defaulters tend to
take less amount of
credit in any
occupation type.
Also, we can see that
Accountants and
Mangers tend to take
more loans and have
more difficulty paying
back as well.
 Previous Application Data

• We have followed the same steps as the current application data for Data Cleaning.

• After Cleaning the data, we have merged both the current and previous application data to perform the final
analysis.
Final Dataset Analysis
Count Plot and Pie Plot showing Different status of Loan Offered
Final Dataset Analysis
Count Plot for Contract Type with four subcategory
Inference:

We can see that

the Cash loans are
more commonly
taken than the
revolving loan. This
can be since
Laborer and low-
income type
people are in
majority in the
dataset.
Final Dataset Analysis
Count Plot for Client Type with four subcategory
Inference:

In all the cases

above the
repeating borrower
is getting rejected
more often
followed by new
applicants
Final Dataset Analysis
Count Plot for Gender with four subcategory
Inference:

In all the cases

females have been
refused more as
we have seen
above it is because
they are more in
numbers when
compared to males
hence the disparity
Final Dataset Analysis
Count Plot for Education Type with four subcategory
Inference:

Here people from

less educated
background that is
secondary and
secondary special
have taken more
loans compared to
others
Final Dataset Analysis
Count Plot for Income Type with four subcategory
Inference:

In all cases
working people
have been
approved more
and have more
loans when
compared to other
classes of people
followed by
commercial
associates
Final Dataset Analysis
Count Plot for Family Status with four subcategory
Inference:

We can observe
that married clients
are the biggest
borrowers from the
bank.
Final Dataset Analysis
Count Plot for Payment Type with four subcategory
Inference:

Cash through Bank

category is the
preferred form of
borrowing amongst
all the clients.
Final Dataset Analysis
Count Plot for Occupation Type with four subcategory

Inference:

Laborer, sales
staff, core staff and
drivers are the
leading borrowers
who highest in
approval and
rejection.
Univariate Analysis on Final Dataset
Logarithmic Comparison of Purpose of Borrowing

Inference:

Majority of rejected
loans are from the
category 'repairs'.
Also, education
has equal number
of approves and
rejection
Paying other loans
and buying a new
car is having
significant higher
rejection than
approvals.
Univariate Analysis on Final
Dataset
Logarithmic Comparison of Contract Status

Inference:

As we can see that there is disparity between

the two categories target 0 and 1 but loan
purposes of 'Repairs' are the highest amongst
all purposes. There are few places where loan
payment is significantly higher than facing
difficulties.
They are 'Buying a garage', 'Business
development', 'Buying land', 'Buying a new car'
and 'Education'
Hence, we can focus on these purposes for
which the client is having for minimal payment
difficulties.
Bivariate Analysis on Final Dataset
Inference:
Logarithmic Comparison of Credit Amount
The credit
amount of
Loan
purposes like
Buying a
home, land
and car and
Building a
house is
higher.
State
servants have
a significant
amount of
credit applied.
Money for
third person
or a Hobby is
having less
credits
applied for.
Bivariate Analysis on Final Dataset
Inference:
Logarithmic Comparison of Credit Amount vs Housing type
The Housing type,
office apartment is
having higher credit for
target 0 and co-op
apartment is having
higher credit for target
1. Thus, it is safe to
conclude that bank
should avoid giving
loans to the housing
type of co-op
apartment as they are
having difficulties in
payment. Bank can
focus mostly on
housing type with
parents or House or
apartment or municipal
apartment for
successful payments.
Conclusion on Final Dataset
1. Bank should focus on making cash loans more accessible as majority of the people are opting for that also the revolving loans
have equal number of approval and refusal which makes the revolving loan less desirable.
2. Banks should also focus on new clients as they are more likely to get approved and less likely to default.
3. Banks should focus more on female candidates as they are greater in number when it comes to applicants.
4.People from secondary background should be the target area where banks should concentrate as they are the leading majority
followed by higher education people.
5.Working class people and commercial associates are the highest number of people who should be targeted but they should also
put more focus on Pensioners and state servants as they are the new emerging majority who are approved more often and are
less likely to default.
6.Married people are leading in the majority when it comes to approval and rejection, but banks should focus on single people
separated and widowed.
7. As stated earlier, cash through bank is a leading form or loan giving but bank should also focus on non-cash loan from bank
accounts.
8. When we talk about the occupation type the banks should keep in mind the IT and HR staff as they are the least likely to default
and target them the most.
9.The banks should shift their focus from urgent needs as they have no unused offers that means they are more likely to have more
defaulters.
Conclusion on Final Dataset
10. Banks should avoid giving loans to the housing type of co-op apartment as they are having difficulties in payment. Also, Bank
can focus mostly on housing type with parents or House/apartment or municipal apartment for successful payments.
11. Banks can also focus on loan purpose of buying house or apartments, cars and additionally, they can come out with creative
schemes that helps loan applied for third person as that purpose has significantly low amount of credit applied.
References
• upGrad. (n.d.). Credit EDA Assignment. https://learn.upgrad.com/
• Dash, R., Kremer, A., Nario, L., & Waldron, D. (2017, June 6). Risk analytics enters
its prime. McKinsey & Company. https://www.mckinsey.com/capabilities/risk-and-
resilience/our-insights/risk-analytics-enters-its-prime
• Janaha, V. (2023, May 3). Data Analytics in banking and Financial Services. Zuci
Systems. https://www.zucisystems.com/blog/how-is-data-analytics-used-in-finance-
and-banking-
sector/#:~:text=While%20fraud%20reduction%20is%20a%20common%20goal%20fo
r,levels%20of%20monitoring%20and%20verification%20to%20those%20accounts.
THANK YOU