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Credit Unions Vs. Banks – Who’s More Likely to Lend?

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Credit unions may have experienced a big bump in membership following last year’s Bank Transfer Day, but the small financial institutions still have a way to go when it comes to the credit card market. According to the latest Experian-Oliver Wyman Market Intelligence reports, a quarterly analysis of consumer credit trends, credit unions make up a very small part of the bank card industry, accounting for only 3.66% of originations during the first quarter of 2012.

Michele Raneri, Experian’s vice president of analytics, says the small percentage is partially due to the fact that, by their very nature, membership-only credit unions have fewer customers. However, “large banks have a wide spectrum of products for a wide variety of consumers,” she adds. For instance, they may have several travel rewards cards, balance transfer cards and general rewards cards in their arsenal to woo a wider customer base.

Credit unions, on the other hand, typically have a single card designed to monitor cash flow.

“They just don’t have the bandwidth to supply credit to more people,” Raneri says.

[Free Resource: Check your credit score and report card for free before applying for a credit card]

Free Tool: Credit Report CardBut the smaller variety of offerings shouldn’t dissuade some consumers from applying for a credit union product. According to Experian’s data, credit unions are actually more apt to lend to applicants who don’t necessarily have perfect credit scores.

“They have made an effort to supply more credit to a little bit lower of a VantageScore compared to the rest of the market,” Raneri says. Current 2012 bank card originations show credit unions lending to consumers who average a VantageScore of 761, while the entire market is running an average of 799. (Note: VantageScore operates on a scale of 500 to 990.)

Credit unions also tend to emphasize different aspects of a person’s credit report than their larger counterparts.

“[Credit Unions] are more willing to grant new bank cards to consumers who were a little bit more maxed out,” says Raneri. However, while they do pay less attention to utilization, they are more stringent when it comes to delinquencies. In 2012, only approximately 1.25% of new credit union originations were awarded to consumers who had missed two or more payments over the last two years. Comparatively, approximately 1.8% of originations were awarded to consumers with similar delinquencies throughout the entire market.

Experian aggregated the data from its customer database. Bank card originations exclude retail or mono-line cards, which can only be used at one establishment.

In addition to the different lending criteria, many credit unions do offer competitive rates and rewards on their products. You can find out some of your better options in this round up.

[Credit Cards: Research and compare credit cards at Credit.com]

Image: Retailmania, via Flickr

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  • John

    There was a whole internet campaign a while ago, where everyone was going to ditch the banks and move to credit unions. I have no clue the numbers that actually went, but think it was along the hundreds of thousands.

    If more people joined credit unions, then they’d surely grow to offers better services and easily meet the products offered by bigger banks.

  • http://www.thirdstream.ca/ adrianjill

    Undoubtedly credit unions are much better than banks.Really an impressive and detailed post that helps to know more about credit unions.

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