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Using Credit Unions and Your Credit

A credit union is a financial institution that is owned by its members, generally individuals who work in a particular field or live in a particular area. It offers many of the same financial products as most banks but offer loans at a much lower interest rate. Those who deposit the money are able to borrow money because the members run it. A bank, particularly a large one with branches all over the state or country, can turn you down solely on the basis of numbers like your credit rating, but at a credit union you may have the chance to explain unusual factors or unique circumstances before you are approved or denied.

You can benefit financially by being a member of the credit union. A savings account with a bank will accumulate interest over time, but credit unions will pay higher interest to their members and the interest rates on any loan are going to be lower as well. Banks have to keep interest rates on savings low and interest on loans high because they need to make a profit for their shareholders. By contrast, a credit union is a not-for-profit organization run for the benefit of its members.

You may be happily surprised to discover just how many credit unions may be available for you to join. If you have a stable job, you can ask your employer if there is one that you can join through the company. You may also have a close relative who belongs to a credit union that encourages members to have their entire family join. In most areas, you may be available to join a local credit union because of where you are living. These credit unions are run for the benefit of the entire community, and see their operation as a way of reinvesting in the local economy.

Particularly as banks are in trouble as a result of questionable mortgage lending practices resulting in toxic debt, credit unions are becoming more inviting. Because they are local, they generally did not become involved in the mortgage-backed securities and credit swaps that got so many for-profit banks into trouble. Instead, they have generally continued to hold their own mortgages, and thus their members' deposits are generally not at risk from exposure to bad mortgage debt and questions of fraud in the filing of documents related through the transfers of mortgages into trusts for securitization.


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