Banking

Are Credit Unions Good For Bad Credit?

It’s no secret; having bad credit is no good. Bad credit can prevent you from doing everything from renting an apartment to starting a business.

While building or rebuilding your credit obviously takes time, there are various tools that can help you propel your finances forward. For instance, credit unions are one resource that is often used by people with bad credit.

With that in mind, the following is a look at why that is. 

Why and How Credit Unions Help People with Bad Credit

If you are someone who has bad credit, you may be wondering why working with a credit union is more beneficial than working with a bank.

Well, there are a few reasons for this. Some of which are the following:

Nonprofit Institutions

One of the top reasons people with bad credit should use credit unions is that they are nonprofit organizations.

So, unlike major banks, which charge for virtually everything, credit unions do not need to do this, as they are not for profit, to begin with.

Therefore, the products and services being offered are there for the good of the members rather than the good of the organization. This makes it ideal for anyone with bad credit. 

Working with People who Care

One major reason you should work with a credit union to fix your bad credit is that credit unions actually care and want to help.

Unlike banks, which have the sole goal of making money, credit unions are operated by members of the community, for members of the community.

Therefore, credit unions often offer many services and products that are geared towards helping people build or rebuild their credit.

This makes them ideal for people with bad credit who are trying to rebuild. 

Small Loans

Yet another way credit unions help people with bad credit is by offering small loans. They are also typically more lenient in terms of the parameters for approving these loans. 

Small loans can not only help you pay off bills and build your credit that way but repaying a loan is a great way to boost your credit.

This is because consistently making payments on a loan shows that you are financially reliable and responsible.

So, if you can get a small loan and commit to making the payments, you will see a moderate increase in your credit score over the months. 

Lower Fees

Another reason people with bad credit should work with credit unions is that they carry lower fees.

No matter if you are doing an ATM transaction or getting a loan, the fees you have to pay at a credit union will almost always be lower than the fees associated with working with a major bank.

Moreover, they also typically have a much lower minimum requirement to open and maintain checking and savings accounts and rarely charge fees for those who fall under a certain threshold.

Since those who have bad credit are also often experiencing financial issues in general, working with a credit union is a great way to save and pay bills without worrying about the astronomical fees. 

More Personalized Customer Service

Working with credit unions also gives you access to more personalized services.

Not only are credit unions known for being smaller and more intimate, but they also allow members to receive more personalized care.

This means they take the time to meet with members, discuss their unique financial needs and issues, and recommend the best services and products to help them get ahead.

This is a vastly different experience from what you will get when working with most banks. 

Voting Rights

Additionally, working with a credit union also gives you a voice.

Unlike working with major banks, joining a credit union affords you the right to vote on major issues affecting the bank.

This means that you can potentially vote for or against new policies that may work in your favor or against you.

This is ideal for people with bad credit as they are often the least considered when it comes to making major decisions in financial sectors. 

Insured Deposits

Lastly, federal credit unions, in particular, are insured by the National Credit Union Administration.

With the help of the National Credit Union Share Insurance Fund, many credit unions are backed by the U.S. government, which covers individual deposits of up to $250,000.

Therefore, you can save your money and invest in financial products with the peace of mind of knowing that your money is backed by the U.S. government. 

Final Word

Overall, there are plenty of reasons why credit unions are great for people with bad credit.

Not only are they nonprofit institutions that help by offering small loans and other products and resources designed to help individuals create financial freedom, but they also show compassion for individuals, have governmental protections, and lower fees.

Moreover, they provide each customer with a level of customer service that is almost unheard of when it comes to dealing with major banks.

Therefore, if you are trying to build your credit and need help doing so, joining a credit union may be the perfect way to do so.  

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