Recently, FICO announced changes that could help many people get better rates on credit cards, mortgages and other loans. The new version of FICO gives less weight to medical debts in collections (which represent about half of all unpaid collections) as well as to collection debts already paid, leading to a more predictive score.
The FICO revisions could benefit many borrowers and ultimately create new credit card and loan opportunities. As their financial institution, your customers and members naturally look to your guidance on improving their financial footing – and they don’t always think they should have to pay you for it. But, showing that you want to help them get a fair shot by offering the right products, tools and one-on-one service can get you ahead in the long run.
Offer a free credit score checkup
Help alleviate credit score confusion by telling customers and members where they can find a trustworthy, free annual credit report. Encourage them to call you for a free financial checkup, where you can explain what their score means and identify downfalls – some of which may be quite innocent. For example, do they have collections action on a long-forgotten, unpaid parking ticket? Is their score among the estimated one in four that is wrong? Offer tips they may not be aware of, such as keeping their credit utilization ratio below 30 percent or reducing the number of cards with balances vs. paying off one big balance.
Help polish the damage with credit builder loans
Offering credit builder loans can give customers and members at least some of the money they need, showing you are willing to provide that valuable second chance. Financial institutions offering this type of loan are on the rise, so credit builder loans will help you stay competitive -- while you are also helping well-meaning consumers rebuild their credit over time and get back on track for good.
Provide free credit counseling or online tools
Boosting financial health also involves addressing the bigger financial picture via credit counseling or online resources. Tools may include a blog on credit repair or a free downloadable e-book about the basics of building or rebuilding credit. Some financial institutions have even partnered with companies like BALANCE Financial Fitness to offer free educational tools, such as online financial management, along with help from a toll-free information hotline staffed by certified counselors.
Going above and beyond and serving as a safe place to work on financial issues is a conscionable, responsible mission. And, with so many of your competitors doing the right thing for their customers or members, it naturally also becomes the right thing to do for your long-term success.
Includes information from CNBC’s "Quick Hacks for a Better Credit Score", August 22, 2014, and Bankrate.com.