With the fast development of financial products and services, bank’s credit departments collected large amounts of data, which risk analysts use to build appropriate credit scoring models to evaluate an applicant’s credit risk accurately. One of these models is the Multi-Criteria Optimization Classifier (MCOC). By finding a trade-off between overlapping of different classes and total distance from input points to the decision boundary, MCOC can derive a decision function from distinct classes of training data and subsequently use this function to predict the class label of an unseen sample. In many real world applications, however, owing to noise, outliers, class imbalance, nonlinearly separable problems and other uncertainties in data, classification quality degenerates rapidly when using MCOC. In this paper, we propose a novel multi-criteria optimization classifier based on kernel, fuzzification, and penalty factors (KFP-MCOC): Firstly a kernel function is used to map input points into a high-dimensional feature space, then an appropriate fuzzy membership function is introduced to MCOC and associated with each data point in the feature space, and the unequal penalty factors are added to the input points of imbalanced classes. Thus, the effects of the aforementioned problems are reduced. Our experimental results of credit risk evaluation and their comparison with MCOC, support vector machines (SVM) and fuzzy SVM show that KFP-MCOC can enhance the separation of different applicants, the efficiency of credit risk scoring, and the generalization of predicting the credit rank of a new credit applicant. 
Credit risk evaluation using multi-criteria optimization classifier with kernel, fuzzification and penalty factors