Loans, credit, and payments…Oh my.

Putting together the pieces

Everything about credit is finally coming together:  credit scores, establishing one, and how it benefits you. Now, comes the decision to take out an auto loan, or a personal loan, and start regular monthly payments. So, what should you know when going to your financial institution to apply? I spoke with an expert at Maine Savings Federal Credit Union, who explained to me all about how the credit union will determine your eligibility.

 Credit squirrel

Credit squirrel

How do credit unions use credit scores to determine whether a young adult is eligible for a loan?

First, it depends on the type of loan. Here is a scenario:

Frank has been fantasizing of traveling overseas to France.  Frank needs funds.  He needs a passport, airfare, a place to stay, and money for activities, food, and souvenirs.  This is no cheap vacation, and frankly, the funds in Frank’s account just won’t suffice.  Frank will need to apply for a personal loan to fund his France fiasco.  The credit union relies on information from Frank’s credit score, how long he has been employed, and spending patterns, to figure out his eligibility.  
Dean on the other hand, dreams of having a Dodge Nitro.  Dean’s dream also demands dollars, but different from Frank, the decision-making made by the credit union will depend less on Dean’s credit score.  


Because in Dean’s situation, there is collateral.  The financial institution can take possession of Dean’s Dodge if he fails to make his regular monthly payments. But this will not look good for Dean in the future.  In Frank’s situation, the financial institution cannot remove Frank from France, or the France from Frank, if he can’t repay his loan.  Chances are he has already made the trip.  

A good credit history will benefit your chances of obtaining approval for your loan, in all scenarios!

What if I have no or little credit history?

If you have little or no credit history, the credit union will look at things like how long you have been employed, your assets (like a car, four-wheeler, or other valuable items), and your spending patterns.

What are some things I should do to increase my chances of getting a loan that I need?  

Approval would be quicker with a share secured visa, strong co-signer, and a responsibly managed credit card.  A history of loan payments can give you a boost.  If you already have a couple of small loans, and you have been making regular monthly payments on time, your chances of approval will improve.  Your income, however, is not considered toward your credit score.

Questions? Comment or email me at!

Keep living young & free.