Conclusion and Application

The Distance Correlation Analysis shows that:

• Employment duration and income are moderately correlated, suggesting that more years with a current employer might correspond to higher income levels.
• Age also relates modestly to employment and income, which indicates life-stage trends in financial status.
• Conversely, debt-to-income ratio (debtinc) shows no significant distance correlation with any of the other variables, including income, a surprising result that implies individuals across income levels may carry similar debt burdens.

Implication for Loan Evaluation

These insights suggest that traditional indicators like income or age might not adequately capture debt burden risk. As debtinc appears uncorrelated with key demographic and financial variables, loan risk assessments must directly incorporate debtinc rather than infer it from income or employment proxies.

This calls for a data-driven underwriting model that treats debt-to-income ratio as an independent screening factor, helping ensure more equitable and accurate credit evaluations, especially in diverse customer bases, where financial patterns do not conform to assumed norms.