NORTH PALM BEACH, Fla. (3/5/14)--Credit scores carry a lot of weight with lenders when they're considering the credit risk of potential borrowers. A shaky FICO score can negatively impact loan fees, in turn making borrowing burdensome for consumers.
With this in mind, credit unions are offering myriad ways to help their members build up or rectify those all-important scores, a recent article in Bankrate.com noted.
Through low-cost secured loan programs, free credit counseling and online debt management courses, credit unions are enabling members to establish credit, or in many cases rebuild what they lost when the economy fell apart in 2008.
Bankrate.com's March 3 article featured four ways credit unions across the country are helping boost their members' credit.
First, credit unions are offering up credit-builder loans.
Rather than handing over cash upfront, per traditional loans, credit unions such as Digital FCU, Marlborough, Mass., will instead tuck the loan into a savings account.
Members gradually pay off the loan, which in turn improves their payment history, and subsequently their credit scores should improve. Once the loan has been paid off in full, the $5.25 billion-asset credit union gives them the funds, in addition to any interest that's accrued.
Many credit unions such as Charlotte (N.C.) Metro FCU, with $289 million in assets, are offering free credit counseling to their members.
Members who have used such programs often watch their credit scores climb, according to Susan Coughlin, electronic delivery and member retention manager for Charlotte Metro.
"The counseling helps create a more financially healthy member," Coughlin told Bankrate.com.
SAC FCU, Bellevue, Neb., with $694 million in assets, offers the third type of program highlighted in the article: Free online services. SAC FCU maintains a blog on credit repair, which is available to anyone, and consumers can download an e-book that details the basics of fixing credit.
Lastly, the article suggests looking into establishing credit with secured credit cards, a service that many credit unions provide. The service works by allowing members to use cash as collateral for the credit card, and the cash becomes the credit line for the account.