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Can Joining a Credit Union Help Improve Your Credit Score

Can Joining a Credit Union Help Improve Your Credit Score

Do credit unions help build credit? If your credit history is lackluster or your score isn’t as high as you’d like, this is a very relevant question.

Today, we’ll explore the link between belonging to a credit union and improving your credit record. You’ll learn about:

  • Reasons why credit unions are popular
  • Products and services credit unions offer to address your credit score
  • Additional ways credit unions can help you with your financial well-being
  • Other factors to consider

couple discussing options with credit union

Why People Choose Credit Unions

Each person has their own motivations for becoming a credit union member. But, when you’re especially focused on repairing or strengthening your credit profile (or broader financial health), some characteristics of credit unions may be even more appealing.

Here are some key advantages to credit union membership:

  • Favorable Terms. Generally speaking, credit unions offer lower interest rates for borrowing and higher interest rates for depositing.investing money with them than other kinds of financial institutions. It can also be easier to get approved for loans and more flexible conditions.
  • Exclusive Member Benefits. Credit unions are known for giving great perks and discounts to their members. Many also provide valuable services like financial education and counseling.
  • Trusted. Surveys consistently indicate that members feel their credit unions are safe, secure, and operating in members’ best interests.
  • Community-Based. Credit unions are rooted in shared affiliation (e.g., the town you live in, your profession, etc.) and tend to give back to its constituents.
  • Better Service. Credit unions typically enjoy a reputation for delivering excellent customer care.

Image of credit cards

Credit Building Tools Offered by Credit Unions

Joining a credit union can equip you to tackle your weak credit head on. These are a few products you can research. 

Secured Credit Cards

Secured credit cards operate like regular credit cards but require a security deposit, which determines your credit limit. They're valuable for people with low or weak credit because they offer access to credit when traditional cards may be inaccessible. Plus, by reporting to credit bureaus, secure credit cards can start to establish your credit. Responsible use — like timely payments and low balances — helps improve your credit score over time.

Share-Secured Loans

A share-secured loan works by using your savings, money market, or share account as collateral. This enables you to borrow against your own funds and build credit through manageable debt. These loans provide access to credit when conventional loans may be hard to get. Because share-secured loans are often reported to the credit agencies, your credit score will reflect your credit use. 

Credit-Builder Loans

Credit-builder loans are designed to help those with limited or no credit history build a positive credit report and improve their credit scores. They work by letting you borrow a small amount and make structured, on-time payments. Structured payments show a track record of reliability to credit bureaus, eventually leading to better credit scores. These loans are a powerful tool for people who’re just entering the credit world or who want to bolster their financial prospects.

Navigating Low Credit Scores with Credit Unions

Most credit unions provide a range of products and services aimed specifically at helping those with limited or bad credit. Here are a few to look into.

Access to “Small”

One big pro to joining a credit union is its willingness to lean in to “little.” This works in your favor in a couple of meaningful ways. First, they’re open to offering smaller loans and credit cards with lower credit limits. (Many mainstream banks don’t have gateway lending products like this.) Secondly, despite your credit profile, credit unions are still inclined to give you lower interest rates when you borrow, charge lower fees (or waive them altogether), and let you make more modest repayment installments.

Financial Education & Counseling

Understanding credit and how credit reporting and scores work is essential. Fortunately, credit unions almost always have free educational events and materials available for members. Free or low-cost counseling sessions, where you can get tailored advice for repairing credit, are common, too.

Flexibility & Personalized Service

No matter what your credit situation is, you’ll appreciate the personal attention you get at a credit union. However, if your credit history is on shaky ground, you’ll love it even more. Credit unions consider each person’s application for loans and credit on a case-by-case basis — so you’ll have more opportunity to explain your situation and why you’re a worthy credit risk. It’s credit unions member-driven policies and decision-making processes that make this possible.

checking a credit score

Advantages of Credit Union Accounts for Financial Health

Having a solid credit score isn’t accomplished by pursuing any one path. It’s a combination of several components, adjusting multiple levers to strike the right balance.

Credit unions are well positioned to help people with credit challenges work toward sustainable financial wellness. Here’s how.

Consistent Reporting to Credit Bureaus

As we mentioned earlier, credit unions report your use of some products — loans and credit cards — to the credit agencies every month. This reporting typically includes information about your payment history, outstanding balances, credit limits, and other relevant account details. The specific timing of reporting varies among credit unions, but is usually done shortly after the closing date of your billing cycle. Monthly updates can reflect positive changes to your credit record faster than less frequent reporting.

Generous Fee Structure & Rates

We’ve already discussed how, compared to regular banks, credit unions have fewer and lower fees (which they sometimes waive) and lower interest rates on loans and credit cards. But why is this critical to getting your finances in peak condition? By making participation in the credit system more affordable, you’re able to access products that let you start or restore your credit legacy. More broadly, it facilitates better money management, which can make it easier to be creditworthier.

Helpful & Handy Options & Benefits

Between online, mobile, and telephone banking capabilities to ATMS and shared branches around the world, credit unions make managing your money convenient, accessible, quick, and personalized. Then layer on all the members-only savings and special offers for even greater effect. The total package encourages and enables responsible fiscal behaviors — like paying your credit card bills on time or abiding by your monthly budget. And, having good monetary habits is necessary for long-term financial health.

Evaluating Potential Challenges

Obviously, we’re on Team Credit Union. But you should make the decision to leverage credit unions to address your credit woes with eyes wide open. You have to weigh the upsides and downsides of credit unions for yourself.

On top of that, not all credit unions are the same and credit unions aren’t always the right fit for every person’s every need.

So, what possible limitations or hurdles do you need to be aware of when it comes to credit unions? When considering joining a particular credit union, you want to make sure the following aspects align with your requirements.

  • Membership Eligibility. Do you meet the criteria to become a member?
  • Availability. Are the tools, resources, branches, and support accessible to you? Where’s it located? What are the business hours should you need help?
  • Scope and scale of product and services. Are there loans, credit cards, and other offerings crafted just for people who’re trying to breathe fresh life into their credit?
  • Technology. Does it have secure systems and protocols that reinforce trust? Does it offer modern tools and interfaces (e.g., online banking or telebanking)?

Couple excited to see credit score increase

Does a Credit Union Help Build Credit? Banking with VCU Can!

Valley Credit Union knows establishing and maintaining a strong credit profile is important to you — it opens so many of life’s doors! We want to assist you in reaching this goal and have the products, services, and support to help you make it happen.

We invite you to call or come in today to become a member or find out more about how we can make building or rebuilding your credit easier.

About the Author

 Jake Turpin, Vice President of Member Services

Jake Turpin, Vice President of Member Services, recently marked his three-year milestone at Valley Credit Union. With more than 15 years of experience in the industry, Jake continuously seeks to strike the ideal balance between exceptional customer service and operational efficiency. Beyond his contributions to the credit union, Jake dedicates his time to coaching his children in baseball and soccer. And when he's not at the credit union or on the field, you're likely to find him at the gym, maintaining a well-rounded and active lifestyle.

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