Learning Predictive Modeling with Data from Lending Club Decision Sciences Institute Annual Meeting November 2017 Paul Brooks, jpbrooks@vcu.edu

VCU Master of Decision Analytics Classes every other weekend Friday 12:00 PM to 8:00 PM Saturday 8:00 AM to 3:30 PM Duration 16 months of classes 20 months to degree

Practicum Master of Decision Analytics Data Management Software Fall 2018 Foundation Spring 2019 Foundation Fall 2019 Foundation Spring 2020 Foundation Business Intelligence Data Mining Python Data Management Software Database Design Advanced SQL Tableau Emerging Technologies Text Mining Statistics II R Risk Analysis Forecasting Customer Analytics Simulation Optimization Models Statistics Statistics I Practicum Guest Speakers Workshops Analytics Cases Guest Speakers Workshops Analytics Cases Guest Speakers Problem Formation Practicum Intro Applications Interpersonal Communications High Performance Teams Presentation Skills Leadership Models Accountability Managing Conflict Presentation Skills Problem Solving Influencing Skills Diversity Virtual Teams Written Comm. Leadership

Lending Club http://www.lendingclub.com

Assignment 1: Read Data Download data from one year, import into a data mining software, and describe modifications needed.

Know Thy Data SAS Instructor Lesson 1 Know Thy Data SAS Instructor

Lesson 2 Be prepared when the info management department asks how you want data stored. Better yet, be proactive. LoanStatNew Description acc_now_delinq The number of accounts on which the borrower is now delinquent. acc_open_past_24mths Number of trades opened in past 24 months. addr_state The state provided by the borrower in the loan application all_util Balance to credit limit on all trades annual_inc The self-reported annual income provided by the borrower during registration. annual_inc_joint The combined self-reported annual income provided by the co-borrowers during registration application_type Indicates whether the loan is an individual application or a joint application with two co-borrowers

Assignment 2: Predictive Modeling Plan Write a 1/2-1 page plan to develop a predictive classification model that would support decision making at Lending Club. Would you use data on rejected applications or just historical data on approved loans? What business decision would your model support?

Lesson 3 The first response in any task for knowledge discovery through data mining is …

Lesson 3 The first response in any task for knowledge discovery through data mining is … You collected the wrong data. Here is the data you need:

Lesson 4 The second response in any task for knowledge discovery through data mining is … But here is what we did find…

Assignment 3: Predictive Model Implementation Create classification models using two different methods and compare their performance based on the confusion matrix for the validation data. Describe all preprocessing steps and provide an interpretation of the performance comparison. Refer to your proposed plan from the previous assignment and include aspects of it to provide context to your work and/or include an updated plan.

Lesson 5 When building a predictive model, be careful to use data that would be available at the time of prediction. Loan Status Charged Off Default Current Late (16-30 days) Late (31-120 days) Fully Paid In Grace Period total_pymnt Payments received to date for total amount funded total_pymnt_inv Payments received to date for portion of total amount funded by investors total_rec_int Interest received to date total_rec_late_fee Late fees received to date total_rec_prncp Principal received to date

Communicate with information management. Conduct an experiment. Lessons When building a predictive model, be careful to use data that would be available at the time of prediction. Know Thy Data. Communicate with information management. Conduct an experiment. Find some interesting patterns anyway. Be wary of the time of prediction.