18 Jun

What Are Credit Builder Loans and How Do They Work?

Credit Builder Loan at RMLEFCU

If you have poor or no credit, it may seem like getting a loan is impossible.

A lender’s main concern when considering a loan application is whether or not the applicant will be able to pay the loan back. Your credit score is a way for lenders to know if you are trustworthy enough to loan to. A credit score takes into account payment history and allows lenders to determine if the applicant is risky or not.

A credit builder loan is designed for people who have poor credit or little to no credit history to build credit. It’s designed to help you eventually qualify for other loans.

What Is A Credit Builder Loan?

Building up your credit takes patience. To show lenders you are consistently reliable and make on-time payments, you’ll need to put in the work. Credit builder loans are a great way to begin establishing a good credit score.

A financial institution, such as a credit union, deposits a small amount of money into a secured savings account. The borrower then pays the money back in monthly installments, with interest, over a set period of time. At the end of the loan’s term, the borrower receives the total amount of the credit builder loan in a lump sum, plus any interest earned, if the lender offers interest.

RMLEFCU’s credit builder loan features:

  • No money needed to secure the loan
  • Eligible to members 18 and older who have means to repay the loan
  • Low monthly installment payments
  • Convenient automatic payments
  • Easy application process
  • Quick, local decision-making
  • Attentive, friendly service from start to finish

How Does A Credit Builder Loan Work?

This loan helps build credit by providing an opportunity for people who want to build their credit to make small monthly payments.

With this loan, your credit history will show you can make regular, on-time loan payments.

Most credit builder loans are small, which means they will have small monthly payments. Interest rates vary by bank, so be sure you compare all your options to get the best rate.

Where Can I Find A Credit Builder Loan?

Rocky Mountain Law Enforcement Federal Credit Union, of course!

Credit Unions often list loans and loan details online and have lower rates than traditional banks. Take a look at the loans RMLEFCU offers.

Some traditional banks also offer credit builder loans to help clients build a good credit score and work toward good financial health.

If you have any questions or would like to talk to a lending officer at RMLEFCU about our Credit Builder Loan, give us a call at 303 458-6660 or send a message to lending@rmlefcu.org.

18 Feb

The Ultimate Guide to Credit Scores

Credit Score Tips

The talk of credit scores often surrounds finances, but how many of us know how they’re calculated and actually used for? We all know they affect how much credit you can get and that it’s better to have a higher credit score, but how are they calculated? Don’t worry! RMLEFCU has compiled a handy guide on what your credit score is, how it’s calculated, and how to raise and keep your credit scores high. Read on to find out!

What is a Credit Score?

Let’s go to the very basics and understand what a credit score is. It’s a three-digit number that is basically a grade for how well you have managed loans, lines of credit, and other financial obligations over the years. Banks and lenders use it to decide whether they’ll approve you for a credit card or loan.

There are three main credit bureaus; Equifax, Experian, and TransUnion, that create your credit reports with credit scoring models like VantageScore and FICO. These models are used to come up with a score that ranges from 300-850.

It’s also not uncommon to have multiple different scores at the same time, with the numerous ways to calculate them. You can have different scores if a lender doesn’t report to all three credit bureaus or reports updates to them at different times. You could also have different scores depending on the what loan or car you’re applying for. For example, an auto lender might use one scoring model, while a mortgage lender uses another.

This might be confusing, but not to worry, these scores are calculated on a similar basis, which leads us to our next question.

How are Credit Scores Calculated?

We’ve touched base on how important these scores are so let’s get to how they are calculated so you understand the works of your score. All scores are calculated differently, however, they generally consider similar factors such as:

  • Payment history (35%)
  • Debt usage ratio (30%)
  • Credit history age (15%)
  • New credit (10%)
  • Credit mix (10%)

Your payment history is the payment records of car loans, mortgages, retail accounts, installment loans, credit cards and more. It’s critical to make sure your payments are on time because late payments and accounts sent to collections can have a significant negative impact on your score.

Your debt usage ratio calculates the total amount owed on accounts in relation to the total credit limit. A general rule is to keep your balance below 30% of the total credit available.

Length of credit history looks at the age of your accounts, the number of recently opened accounts, and new credit vs. established credit.

New credit/inquiries are also considered in your score and the calculation consists of the number of recent inquiries, the time since an inquiry, the number of recently opened accounts, and the time since opening an account.

Additionally, having a balanced credit mix is also important for your score. These accounts include credit cards, installment loans, mortgages, consumer finance accounts, and more. A mix of credit types can have a more positive impact on your credit scores than a credit report that shows only one type of credit.

How Do I Increase My Credit Score?

Now that you know what a credit score is and how it’s calculated, it’s time to understand how you can increase your credit score.

The most impactful way to improve your score is through your payment history. Your scores are affected greatly by this factor, contributing to 35% of the score calculation and has the greatest effect on improving your scores, but missed or late payments are not easily fixed. If you already have missed payments, it’s best to get up to date with your payments and stay current. The longer you keep up with on-time payments, the more your score should increase. The impact of prior credit problems will fade over time as long as recent good payment patterns show up on your report.

The second largest factor contributing to your credit score is the debt usage ratio, contributing 30%. It’s best to keep your balances low on credit cards and other revolving credit. High outstanding debt can affect a credit score and it’s best to pay off debt rather than moving it around. It’s also unwise to open a number of new credit cards that you don’t use just to increase your available credit limit or to close unused credit cards as a short-term strategy to raise your scores.

Need help building up your credit? RMLEFCU offers a Credit Builder Loan to rebuild your credit score if it is damaged or non-existent. You don’t need to put down any money to secure the loan and there are low monthly installment payments, making it easy to get your score up!

If you would like to open a new line of credit with RMLEFCU or help rebuild your credit with a Credit Builder Loan, don’t hesitate to contact us or visit a branch.

25 Jun

Why Your Credit Score is Important

credit score

We all know that credit scores are important, but do you really know why? We’re here to let you know what goes into your credit score and why it’s important to keep it at a good level.

What is a Credit Score?

A credit score is a numerical value used to evaluate a consumer’s creditworthiness based on financial history. The scores range anywhere from 300-850 (bad to good accordingly) and are determined by three main credit bureaus; Equifax, Experian, and TransUnion. They are based on things like on-time payments and how many accounts you have open in good standing.

Loans

When applying for a loan, financial institutions look at your credit score and credit history to determine if you’ve proven to be responsible with your payments in the past. They do this to ensure that they only give loans to the people who they are more confident will be able to pay them off. That is not to say that you cannot get a loan if you have a less-than-great credit score. Typically, the lower your credit score, the higher your interest rate on the loan will be because you are considered a higher liability customer. This can add up quickly for large mortgage or home loans, as interest can accrue over time making it more difficult to pay off the balance of the loan.

Renting

If you’ve ever rented a house before, you know that landlords and property managers commonly ask for your social security number. This is because they’re running a background and credit check on you to determine if you will pay your rent on time. If your credit score is too low for their liking, they will more than likely reject your application and you will be stuck looking for another place to live.

Employers

Sometimes, employers will look at their prospective employees’ backgrounds and credit scores to assess the risk of hiring a candidate before extending an offer. This is most common in finance roles or in a position where you will be responsible for handling company money. The thought process being, if you can’t handle your own finances well, how could you manage those of others?

If you need help building your credit or repairing damaged credit, our credit builder loan is a perfect way to build positive credit without any risk. Learn more and apply online today

26 Aug

How to Build Good Credit

how to build good creditCredit. Those five little letters have the ability to inspire fear and raise blood pressure. If you have little to no credit history or a low credit score, RMLEFCU’s Credit Builder loan was designed with you in mind.

It works like this: RMLEFCU acts as a gatekeeper and loans you between $500-$5,000 with a rate determined by your FICO score and our signature loan rate. You make payments on the loan over a period of time, perhaps a year, and RMLEFCU puts the money in an interest-bearing savings account. Once the loan is paid off, you can access the full amount.

To help ensure your success, RMLEFCU will arrange for a low monthly amount and set up automatic repayment options. Just ask us the next time you’re in or call our main line at (303) 458-6660. You’ll know within minutes if you are approved. Read More

24 Jun

4 Things You Must Do To Build Your Credit

Build your credit score RMLEFCUWe know you’re a trustworthy, reliable person. Anyone who has ever met you can tell right away that you fulfill obligations and that your word is as “good as gold.” I have bad news and more bad news. First, the price of gold is dropping and second, your reliability and trustworthiness, at least to people who might lend you large sums of money to buy a car or a home, relies on three little numbers – your credit score.

So, what are 4 things you need to do to build your credit?

  1. Get a credit card. First check out RMLEFCU’s visa cards. We have a couple options available depending on whether you want better rewards or a lower interest rate. If you’re unable to get an unsecured credit card, look into a gas card or store card. We would suggest if it’s a store card, to get one at a place where you normally do your shopping. For example, check out Target or Wal-Mart store credit cards. With Target you’ll get 5% off with every purchase, no shipping if you shop online and you’ll have 30 extra days to return items. With Wal-Mart, when you first open your account and spend $75 at Walmart.com, you’ll save $25. You’ll also receive 5 cents off per gallon at participating Wal-Mart gas stations. Bonus: Neither card has an annual fee.
  1. Pay your card IN FULL and ON TIME each month. We know what you’re thinking, isn’t this two things in one? “Paying in full” is like the peanut butter to the jelly that is “on time.” They are best when they are done together. Contrary to popular belief, you don’t need to carry a balance to build an awesome score. If you absolutely cannot pay it in full, always pay the minimum balance.

To make sure you are never late, set up an automatic payment. If for some reason that option is not available, ensure you have some kind of reminder, handwritten or electronic, to pay the bill each month. Thirty-five percent of your credit score is determined by your track record with making on-time payments on your bills.

There are a couple of myths out there about building credit that, like cockroaches, are hard to kill. Carrying a large balance will help boost your score and so will closing old accounts you don’t use. Doing either of these can really HURT your credit, so avoid them at all costs. Little known fact: Fifteen percent of your credit score is based on the length of time you’ve maintained a credit account.

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