Over the years, we have explored the multifaceted nature of credit scores across various articles. To provide you with a streamlined strategic resource, we have curated and updated our most essential insights into this comprehensive guide. Because credit unions are built on the foundational principle of financial stewardship, proactively engaging with credit scores and your members is more than just good business—it’s central to your mission.
Help Your Credit Union Members Organize Debt
Debt can be crippling for your credit union members. The stress and worry can make it seem like there is no light at the end of the tunnel. Consolidation loans are a great way to help members organize debt. A consolidation loan can have many positive effects on members. Help Members Organize Debt with Consolidation Loans A consolidation loan combines several unsecured loans into a single loan. This new consolidated loan is usually used for the purpose of reducing monthly payments by having a more favorable rate. Oak Tree Business Systems, Inc. helps you offer consolidation loans by providing a superb consumer forms package. It is one of the easiest ways to offer your members a consolidation loan. The benefits to members are tremendous. Here are a few of the benefits of a consolidation loan, and how it can help members organize debt:
Help Your Members Improve Their Budgeting
With a consolidation loan, members can combine several debts into one convenient monthly payment. This drastically simplifies their budgeting process.
Stress Reduction
Nothing stresses out an individual like debt. It is a constant worry. A consolidation loan can relieve the pressure by eliminating the need to deal with several debtors at once. One payment, one entity to deal with. That’s a good option to relieve stress.
Better Interest Rate
This is a great selling point for you. Credit unions typically offer lower interest rates than banks on credit cards and other unsecured loans. This is music to a member’s ears. Who wouldn’t want a lower interest rate?
Credit Score Improvement
Again, this is another important point to make when explaining consolidation loans to members. Credit scores improve when multiple debts are paid off at once. This will help your member out in the long run for future loans with lower interest rates.
Lower Payments
This goes hand in hand with what we mentioned in points one and two. Lower payments are not only attractive; they help with budgeting and stress, too. What a great feeling to be in control of your finances! Remind them that these payments are lower because they typically offer more extended repayment terms than most other types of unsecured loans. Finally, remember to use your two-step checklist when dealing with a member or potential new member. First, he or she must be a member in order to obtain the loan. Second, a credit score check must occur to determine the amount he or she qualifies for. This information will also be used to identify which types of debt will need to be consolidated under the new loan. We offer a great suite of credit union forms packages to help you every step of the way. All of our forms are compliant and integrate seamlessly with your current data processor. This allows you to focus on what is most important, helping your members to achieve their financial goals. The loyalty and trust established by helping them will generate more gains for your organization.
Buy Membership Documents and Consumer Lending Forms by emailing us at clientservices@oaktreebiz.com to help your credit union members organize debt and get on with their lives.
Credit Scores Matter to Your Members
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 over 40 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!
How are Credit Scores Determined?
It’s the time of year when credit unions see an increase in consumer lending. Members seek to secure home loans or financing for an automobile. That means two things are necessary. First, you are going to need compliant consumer lending and/or home equity lending forms. Oak Tree has forms to cover all lending and disclosure requirements to fund either loan type. Our home equity and consumer lending packages are customizable and contain all of the disclosure forms necessary to make the process as simple as possible. When your members ask “how are credit scores determined”, you should be prepared for some answers.
Secondly is a discussion about credit scores. They are perhaps the primary determining factor, and a proper understanding now can help your members secure the best financial opportunities later. Credit scores influence interest rates, loan amounts, collateral requirements, and ultimately whether or not to lend money to a borrower. Here is how they are determined:
Types of Credit
This is actually referring to the types of credit already used by a member and generates 10% of a member’s overall credit score. It’s comprehensive too, including things like a consumer’s mortgage, retail accounts, credit cards, and installment loans.
Amount Owed
This comprises 30% of an individual’s credit score. Things included here are items such as the total number of accounts (and their balances), how much of any credit line is used at any given time, and the ratio of installment amounts owed against the amount already paid.
Credit History Length
15% of a consumer credit score comes from one simple factor: the amount of time an account has been active. Consumers with new accounts indicate more risk since they are considered new to the world of lending.
New Credit
This makes up 10% of an individual’s total score and accounts for how many credit accounts have been recently opened, and the total proportion of those accounts levied against things like recent inquiries, and any positive reestablishment of credit history if payment was a problem in the past.
Changes
Of course, anyone’s credit score will change over time, accurately reflecting current financial behavior. Negative information falls off after so many years regarding things like bankruptcy, lawsuits, or judgments. With all of these factors in the mix, it’s highly possible that an individual’s credit score will look different from one month to the next. This is good information to have on hand when it comes time to discuss lending with one of your members. Our lending forms packages can help you facilitate the process of underwriting to make it as simple as possible. The credit conversation, however, is up to you. It might be great to discuss the importance of credit scores beforehand with those members who are interested in consumer credit. News flash, Oak Tree can help you market those potential members. Contact us at MarketingServices@OakTreeBiz.com
This will allow them to make adjustments before they seek funding, and hopefully, improve their credit score. When the time comes for your members to start the process, you will be ready if you are an Oak Tree customer. They will too since you gave them all the information they needed to properly understand their credit score. If you need consumer lending, or home equity lending forms, contact us today. All of our forms are customized to your needs and can integrate with any data processor. We have you covered, so you can work with your members to improve their credit score so they get the best rates and terms available when it is time for them to borrow!
Oak Tree has been helping credit unions with their lending documents for over 40 years now.
