Do Credit Unions Build Credit to Help Your Finances? | PSECU (2024)

FAQs

Can a credit union help build my credit? ›

While the individual options may differ from one to the next, most credit unions offer custom loan programs designed to help borrowers establish credit for the first time or rebuild damaged credit. Some credit unions use aptly-named “credit builder loans” that function much like secured credit cards.

A credit builder loan has a term of six to 24 months, with amounts ranging from $300 to $1,000. After you apply and are approved for the loan, the credit union or bank will deposit the full loan amount into an account for you. You'll make monthly payments over the course of the loan term until the full amount is paid.

Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.

A bank or credit union may make a soft inquiry on your credit when you open a new checking account to check for a history of fraud. These soft checks do not affect your credit score. However, in some cases, a bank may perform a hard credit check, which does affect your credit score.

What Are the Major Advantages of Credit Unions? Credit unions typically offer lower closing costs for home mortgage loans, and lower rates for lending, particularly with credit card and auto loan interest rates. They also have generally lower fees and higher savings rates for CDs and money market accounts.

Is It Easier To Get a Loan at a Credit Union or a Bank? When you choose to work with a credit union vs a bank, credit unions are often more forgiving when it comes to your credit score. In addition, credit union members are able to vote in policies and make decisions that are more friendly to borrowers.

For instance, going from a poor credit score of around 500 to a fair credit score (in the 580-669 range) takes around 12 to 18 months of responsible credit use. Once you've made it to the good credit zone (670-739), don't expect your credit to continue rising as steadily.

For decades, bankers have objected to the tax breaks and sponsor subsidies enjoyed by credit unions and not available to banks. Because such challenges haven't slowed down the growth of credit unions, banks continue to look for other reasons to allege unfair competition.

What is a weakness of a credit union? ›

With a credit union, you might have to do some extensive research to compare accounts and find out what services they offer. Credit unions only serve certain groups of people and if the ones you can join don't have mobile banking or their apps aren't up to par, that could potentially be a major disadvantage.

Generally, credit unions are viewed as safer than banks, although deposits at both types of financial institutions are usually insured at the same dollar amounts. The FDIC insures deposits at most banks, and the NCUA insures deposits at most credit unions.

You will need a credit score of 580 or higher to get a $30,000 personal loan in most cases, along with enough income to afford the monthly bill payments. Other common loan requirements include being at least 18 years old, being a U.S. citizen or a permanent resident, and having a valid bank account.

The lower interest can provide you major long-term savings, particularly if you carry a balance on your credit card from month to month. Many credit union credit cards come with travel insurance, extended warranty protection, or even price protection.

FICO^® Scores are the most widely used credit scores. Each FICO^® Score is a three-digit number calculated from the data on your credit reports at the three major consumer reporting agencies—Experian, TransUnion and Equifax.

You need a credit score of 700+ to get a credit card from most credit unions, though some credit unions have options available for people with bad credit or no credit history. There are credit union cards for every credit level, and some of the best credit union cards are only available to people with excellent credit.

If you want to build credit without a credit card, you might try a credit-builder loan, secured loan or co-signed loan. There are also ways to use rent, phone and utility payments to build credit. Some of these ways are free, others carry a fee.

In our examination of 50,000 Credit Strong^® credit builder accounts, we found that the average account holder increased their FICO^® Score 8 by more than 25 points within three months of opening a Credit Strong credit builder account. After nine months the average credit score improvement increased to almost 40 points.