Does joining a credit union hurt your credit?
Joining a credit union in and of itself will not improve your credit score, since the fact that you are a member of a credit union does not usually appear on your credit report. However, credit unions offer many financial products, including loans and credit cards.
Because credit unions are not-for-profit, they can offer members numerous benefits that can directly and indirectly build an individual's credit score.
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.
FICO® Scores are the credit scores used by most lenders, and different lenders may use different versions of FICO® Scores.
You don't need a credit score to open a bank account, so what do you need? Banks and credit unions typically ask for the following when you're opening an account: Government-issued photo identification, such as a driver's license, passport, state ID or military ID.
Hard inquiries, or “hard pulls”, occur when a lender or creditor reviews your credit report (with your permission) as part of their decision-making process. Hard pulls show you've applied somewhere to get credit, such as a mortgage, credit card, or auto loan.
If you already have a good relationship with your bank or credit union — meaning you have a checking or savings account and no history of overdrawing on your account — you may find that it's easier to qualify for a credit card with them.
- Mobile Banking Might Be Limited or Unavailable. ...
- Fees Might Not Be as Low as You Think. ...
- Credit Card Rewards Might Be Limited. ...
- ATMs and Branches Might Not Be Convenient.
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.
Credit unions tend to offer lower rates and fees as well as more personalized customer service. However, banks may offer more variety in loans and other financial products and may have larger networks that can make banking more convenient.
What is a good credit score for a credit union loan?
However, your chances of getting a loan with a low interest rate are much higher if you have a “good” or “excellent” credit score of 690 and above.
FICO ® Scores are the most widely used credit scores—90% of top lenders use FICO ® Scores. Every year, lenders access billions of FICO ® Scores to help them understand people's credit risk and make better–informed lending decisions.
Lenders generally see those with credit scores 670 and up as acceptable or lower-risk borrowers. Those with credit scores from 580 to 669 are generally seen as “subprime borrowers,” meaning they may find it more difficult to qualify for better loan terms.
| APR range | Minimum credit score requirement | |
|---|---|---|
| Best Egg | 8.99%-35.99% | 600 |
| LightStream | 7.99% to 25.49%* with Autopay | 695 |
| Upgrade | 8.49%-35.99% | 600 |
| SoFi | 8.99%-29.99% | 680 |
For example: A history of writing bad checks. Some people are listed in a database of customers who have been identified as having mishandled checking accounts in the past, which means the bank or credit union is less likely to let them open a checking account. Failure to provide adequate identification.
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.
How Do Hard Inquiries Affect Your Credit Score? Hard inquiries can have a negative impact on your credit score, in the short term at least. While a hard inquiry will stay on your credit report for two years, it will usually only impact your credit for up to a year, and usually by less than five points.
Since hard inquiries affect your credit score and what is found may even affect approval, you might be wondering: How many inquiries is too many? The answer differs from lender to lender, but most consider six total inquiries on a report at one time to be too many to gain approval for an additional credit card or loan.
Why Choose a Credit Union? Lower interest rates on loans and credit cards; higher rates of return on CDs and savings accounts. Since credit unions are non-profits and have lower overhead costs than banks, we are able to pass on cost savings to consumers through competitively priced loan and deposit products.
Because credit unions are member-owned, they're often able to offer lower rates and fees on their financial products than traditional banks. Consumers who routinely pay a few days late or carry a balance may also find that a credit union card is much cheaper to use than a bank-issued card.
What is one mistake that could reduce your credit score?
Making late payments
The late payment remains even if you pay the past-due balance. Your payment history may be a primary factor in determining your credit scores, depending on the credit scoring model (the way scores are calculated) used. Late payments can negatively impact credit scores.
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.
Some credit unions offer loans specifically for debt consolidation, but most offer personal loans that can be used for debt consolidation. Credit union members in the U.S. in 2023 were paying on $1.56 trillion in loans, with the average amount owed $17,511.
Higher returns, better savings, low interest on borrowings, and a sense of community – these are just a few of the benefits of credit union membership.
The main benefits of a credit union vs. a bank are that credit unions tend to offer better rates and customer service, lower fees, and a national network of ATMs. However, a bank may offer more branches and products than a credit union.
