CPFB research shows benefits of loans that could help consumers build credit
New report outlines options for consumers to establish and improve credit—even with existing debt, in some cases
Friday, July 24, 2020
If you could reduce your monthly spending by decreasing your monthly cash outflow, would that help ease a bit of any financial stress you might be feeling?
Maybe you've done one or more of the following:
If you've been able to do any of the above, or have been thinking about it, to improve your financial fitness, you're on the right track.
- Refinanced your home
- Reduced insurance payments on your home, auto or another policy
- Decreased your auto loan payment monthly
- Transferred multiple credit card balances into one payment
- Applied for a credit builder loan to improve, reestablish or begin building credit
The Consumer Financial Protection Bureau has released research on the benefits of “credit builder loans” in helping consumers establish a credit record and improve their credit scores if they have no current outstanding debt.
The report, released during Consumer Financial Protection Week in mid-July, examined 1,531 credit union members who were offered a financial institution’s credit builder loan (CBL), according to a news release from the CFPB.
Some of the highlights in the article include:
- For participants without an existing loan, opening a CBL increased their likelihood of having a credit score by 24 percent.
- Participants without existing debt saw their credit scores increase by 60 points more than participants with existing debt.
- The CBL was associated with an average increase in participants’ savings balances of $253.
- Without a credit score, consumers may face challenges to accessing credit or qualifying for lower-interest rate loans and credit products, the CFPB reports.
- Among participants who entered the study with a score, the average score was a subprime 560.
- Sixty-two percent of participants had annual household income under $30,000.
Did you know NHFCU has an innovative credit builder loan that we've been helping members with for several years? If you would like to get on the right track to meeting your financial goals, whether you are just starting to build credit or if you have stumbled in the past, contact us today at (603) 224-7731, or click here to apply .
NHFCU also helps members with auto refinancing, which translates into a decrease in that monthly cash outflow. Our rate for 2016 and newer vehicles is currently 3.5%*. Contact a representative today at (603) 224-7731 or Click here to apply.
*Annual Percentage Rate (APR). All loans are subject to credit requirements. Rates and terms are subject to change without notice. Rates not available for vehicles already financed with NHFCU. Mileage, age, and condition of the vehicle may affect the terms and rate of any loan. 72 month financing available. NHFCU may lend to members only.
Click here to view the full article from the CFPB - CFPB Research Shows Benefits of Loans That Could Help Consumers Build Credit. New report outlines options for consumers to establish and improve credit—even with existing debt, in some cases.