Credit Unions and Your Credit Score

27th May 2024

In 1964, the first credit union in Britain opened its doors as a new way of offering banking facilities to people who have difficulty accessing standard finance. Credit unions have grown to serve over 1.2 million individuals across England, Scotland and Wales in the last five decades and can be a great choice for anyone who feels excluded from high street banks by their credit score or financial history.

What Is A Credit Union?

A credit union is a financial cooperative, extending savings, loans, and various services to its members. Unlike traditional financial institutions, it is owned and governed by its members and doesn’t try to make a profit. There are usually rules about who can join a credit union, and membership might be restricted to people living in a certain area, or who work for a specific employer.

Services Offered by Credit Unions

Credit unions provide a wide range of financial products which have been designed to meet the needs of the people who they have as members. Most credit unions will offer savings accounts and loans, with many credit unions also providing additional products such as children’s savings accounts, Christmas savings accounts, prepaid debit cards, insurance, cash ISAs, and even mortgages.

Savings

Credit unions encourage regular saving among their members, offering various options such as Christmas savings accounts, notice accounts, junior savers’ accounts, and cash ISAs.

Why Choose a Credit Union?

There are lots of reasons to consider joining a credit union. The main benefits are:

• Culture of encouraging regular saving and responsible borrowing.
• Ease of saving, with only small amounts needed to open an account.
• Partnerships with employers allowing direct saving and loan repayment straight out of your salary.
• Profit-sharing with members through annual dividends.
• Affordable loans tailored to various needs, often at lower interest rates than you would get elsewhere.
• Accessibility of credit to individuals with challenging circumstances, or with lower credit scores.

Although credit scores started off as bricks and mortar locations dealing with customers only face to face, there are many unions which have now also moved online, allowing you to access your accounts, pay in money and apply for loans of credit online. Credit unions are underwritten and guaranteed in the same way as other, larger banks, so there is no need to worry about the safety of your money.

Effect on Your Credit Rating

Credit unions feed information into the large credit reference agencies in the same way as other financial institutions do. If you can’t access loans or a mortgage through a high street bank, starting to save with a credit union or taking out a small loan can be a good way of boosting your credit score by proving that you can manage your finances and pay money back on time. Many credit unions also have financial experts who offer their services free of charge to members. They will help you audit your finances and will give advice on easy steps you can take to improve your score.