In this post, we would try to cover two important concepts in predictive modeling known as the weight of evidence (WOE) and information value (IV) in python. This post is further divided into various sections:-. 1) What is WOE and IV. 2) Calculate WOE and IV. 3) Calculate WOE and IV in python. 4) Variable reduction using IV. WoE Binning and Feature Engineering. Creating new categorical features for all numerical and categorical variables based on WoE is one of the most critical steps before developing a credit risk model, and also quite time-consuming. There are specific custom Python packages and functions available on GitHub and elsewhere to perform this exercise.