Raising your members’ credit scores

According to Fair Isaac, the creator of the FICO credit score, the average credit score has reached 700 nationwide. This is the highest national credit score in over 12 years. Along with the record high score, the number of low scoring individuals is at a record low. Only 40 million individuals currently have a score below 600, or only 20% of U.S. adults. This number is down 5.5% from 2010. The rise in average credit score can be credited to:

  • Falling unemployment numbers
  • Continued economic growth
  • Increased passage of time since the recession and housing meltdown
  • Personal financial setbacks, namely foreclosures and bankruptcies, which can stay on an individual’s credit report for 7-10 years, are now falling off reports.

Why Your Members Will Benefit from Higher Credit Scores

Your members’ credit score are checked by lenders, creditors, and insurers when determining whether or not to approve them for loans, credit cards, or insurance policies. With a higher credit score, your members are more likely to be approved easily for financial services such as credit cards, mortgages, and life insurance. Along with being easily approved, they will have the benefit of better rates and fees. Benefits to you customer’s for a high credit score include:

  • Approved for higher limits on loans or credit cards
  • Can apply for premium credit card products (higher reward rates and fringe perks)
  • Easier to refinance their mortgage and lock in a better interest rate
  • Easier approval and expanded options for rental houses or apartments
  • Lower homeowner’s insurance premiums
  • Improved car insurance rates
  • Able to avoid security deposits to establish utility services

Helping Lower Your Members’ Credit Scores

There are a few simple changes your members can make in order to speed up the process of seeing a credit score increase. If they’re not sure where to get started, or feel overwhelmed by the process, encourage your members to make these three simples steps:

Checking the Accuracy of Their Credit Report – There is always the possibility for errors on your members’ credit reports. Last year alone, 23% of complaints to the Consumer Financial Protection Bureau were about credit reports. Most of these complaints were regarding incorrect information found in credit reports. Individuals can check their credit score every year at no cost. This is the time to look for errors, using different names when applying to credit (full name vs nickname) and typos are common ways that errors occur.

Paying Bills On Time – Not just to avoid late fees. 35% of an individual’s credit score is determined by their history of paying bills on time. Paying bills late or not paying them at all can impact your members’ score incredibly. Encourage your customers to set up simple calendar alerts or other reminders (such as a personal finance app) that can alert you when due dates are approaching. There is always the option of automatic payments so they’re not bothered with the task every month. Members can set up automatic bill pay for reoccurring bills such as their student loans, car payment, or rent/mortgage.

Reducing Debt – Keep your credit card balance low. An individual’s credit score diminishes with a high credit card balance or an increase in debt. Remind your members to keep their credit card balances low by not reaching their max credit limits. When paying off their debt, be sure your members know to pay the balance of the card with the highest interest rate first, not necessarily the one with the highest balance. Members should debt first, then for future, try and use cash as much as possible as opposed to credit cards. This will help them avoid the dreaded impulse buy and keep them from spending more than necessary.

Consolidating Debt: For those members struggling with multiple credit card, loans or other repayment plans, debt consolidation may be their best option. Debt consolidation allows individuals to combine their debts and make one monthly payment. Debt consolidation comes in many forms including transferring of credit card balances, taking out a personal loan, or enrolling in a debt management plan. Each debt consolidation plan has their pros and cons, and some, like a debt management plan, may hurt their credit score temporarily, so be sure to inform your members of all their options.

What ways are you helping to lower your members’ credit scores? Share with us below!

Kara Vincent

Kara Vincent

Kara Vincent is a Finance Officer at Lancaster Red Rose Credit Union. With over 15 years in the financial services industry, Kara provides an integral role in serving the needs ... Web: https://www.lrrcu.org Details

More News