The credit score is a crucial part of modern financial life, but many consumers remain confused about what the number is and how it affects their ability to receive loans. The current system compounds this confusion by obscuring what data is used to calculate credit scores and often making it impossible to view a personal credit score for free. Luckily, this outdated system is being usurped by a friendlier method of credit monitoring that will surface relevant credit information for consumers. Freer access to credit scores could become a major differentiating factor for credit unions in the coming months.
Credit scores become visible to more people
The sea change in credit score availability is being driven by customer demand for transparency from their financial institutions. While the trend towards exposing credit scores started with certain credit card providers a few years ago, according to the Memphis Daily News, it has accelerated recently amid growing concerns about data security in the U.S.
With 2014 bringing some of the biggest data breaches in history, more Americans' financial information was exposed to criminals than ever before. Because credit scores will be affected by illegitimate payments made with someone's card, the serve as an excellent indicator of fraud. For this reason, officials inside and outside the financial industry, including President Barack Obama, have voiced support for initiatives that allow individuals to easily check their personal credit scores, according to the Credit Union Times.
The value of freely available credit scores
Credit union executives who want to ensure that their members do not default on loan or credit card debt should make it possible for members to check their credit scores for free, and should provide information on how different actions can affect their overall credit score alongside examples of how credit scores correspond to loan eligibility.
"It's easy for people to make financial mistakes that affect their credit score."
Because the reasons for credit score changes are not disclosed to many individuals currently, it's easy for people to make financial mistakes that affect their credit score without realizing it. Greater credit score access and education should correct this problem, and will likely encourage financial responsibility.
These benefits, and the increased confidence that members will feel when they are able to freely view their credit scores, make this ability a key differentiator between different financial institutions. With many of the large traditional banks opening up access to credit scores, credit unions should consider offering this capability to members.