Examples from Lending Industry

Decision Rules

In the lending industry, a simple decision matrix is often involved with a few parameters to arrive at an in-principle approval.

An example decision matrix is as follows:

Simple Decision matrix

Bureau Score

Between 650 and 800

Marital Status

Married or Unspeficied

Business Ownership

Owned by Self or Owned by Family

Decision

GO

Bureau Score

Less than 650

Marital Status

Business Ownership

Decision

NOGO

Bureau Score

greater than 800

Marital Status

Business Ownership

Decision

GO

Complex Decision Matrix

There are also scenarios that involve a complex decision tree. In the below example, the applicant's age sits at the top of the decision tree. Based on the applicant's age, additional conditions are involved, resulting in a GO or a NOGO decision.

Applicant Age

>=35

Applicant Ownership

in [Owned by Self, Owned by Family]

Business Ownership

in [Owned by Self, Owned by Family]

Decision

GO

Applicant Age

>=35

Applicant Ownership

in [Owned by Self, Owned by Family]

Business Ownership

in [Rented]

Decision

GO

Applicant Age

>=35

Applicant Ownership

in [Rented]

Business Ownership

in [Owned by Self, Owned by Family]

Decision

GO

Applicant Age

>=35

Applicant Ownership

in [Rented]

Business Ownership

in [Rented]

Decision

NOGO

Applicant Age

<35

Applicant Ownership

in [Rented]

Business Ownership

in [Rented]

Decision

NOGO

Applicant Age

<35

Applicant Ownership

in [Owned by Self, Owned by Family]

Business Ownership

in [Rented]

Decision

NOGO

Applicant Age

<35

Applicant Ownership

in [Rented]

Business Ownership

in [Owned by Self, Owned by Family]

Decision

NOGO

Applicant Age

<35

Applicant Ownership

in [Owned by Self, Owned by Family]

Business Ownership

in [Owned by Self, Owned by Family]

Decision

GO

• When the applicant's age is >=35, either of (applicant ownership or business ownership) must be Owned.

• When the applicant's age is <35, both (applicant ownership and business ownership) must be Owned.

The above are some examples of how specific facts about a loan applicant are used in a series of rules to decide whether to proceed with the loan application.

In the next section, let us look at an introduction of simple-rule-engine Python library.