Your members may be wondering, along with thousands of others, if their credit score really matters. And if so, how much does it matter? A credit score will dictate a lot of their future when it comes to major purchases. Such as applying to get a home loan, an auto loan, or even a credit card for large purchases. An individual actually has multiple scores reported by different credit bureaus, and those scores change all the time. It is important for you to know how the credit scores matter to your members at your credit union.
How Credit Scores Work
There are five main factors that make up a person's credit score. Some of these factors prove more valuable than others. They include amounts owed, new credit, length of credit history, payment history, and credit mix. Lenders, like your credit union, rely on credit scores to help them determine who is considered a “high-risk” borrower and who may be considered a “low-risk” borrower. Credit scores range between 300 and 850. As mentioned, your members may have multiple credit scores, and each score is based on similar factors, but usually will not be identical. Scores also tend to fall within different ranges, as well as numbers (fair, good, or excellent).
Why Your Members Credit Score Matters
Having a “good” credit score will benefit them when making larger purchases as they move forward in life. When they have a higher score it will usually ensure they receive better deals, and rates when it comes to loans, apartments, credit cards, and even cell phone plans. Having a lower score will result in paying higher interest rates, or having your application ultimately rejected. Credit scores have proven to be an integral part of our financial lives, so making sure they are checked regularly, and understanding what affects their score will be an important part of their financial journey.
Growing Your Credit Score
As your members understand a little more about the importance of maintaining a healthy credit score, we want to provide some guidance for your members to continue to grow credit and remain on track.
- Try to avoid closing any accounts, even if paid off.
- Pay balances in full and if you must keep a higher balance, try to pay it down as quickly as possible.
- Regular but light use of your credit cards, while keeping your balances below 30% of your given credit limit.
- Paying your bills on time, of course!
- Setting up auto-pay to ensure no payment is ever missed.
- Now, TAKE ADVANTAGE OF YOUR DEMOGRAPHICS AND SUPPORT THEIR GOOD CREDIT WITH GREAT LOAN RATES!
Here at Oak Tree, we understand the importance of making sure your CU members are getting the best rates, and that you are getting the best forms to conduct business. With 37+ years of experience in the Credit Union Industry, you can count on us to make sure your forms are compliant and held to the highest standards. Contact us today to learn how we can help!