Can a Credit Union Help Improve Credit?

Bankrate reports that as of 2010, there were almost 7,700 credit unions operating in the United States. Credit unions operate as nonprofits, meaning they can offer better terms and rates to their customers. As a customer, you can apply for different credit products, such as credit cards and auto loans, which will help you build a positive credit history and score.

Basics

A credit union works like a traditional bank, except a credit union requires membership. Qualifying for membership depends on the type of credit union. For example, many large corporations operate a credit union for their employees and employees' family members. Credit unions offer checking and savings accounts. Many credit unions also offer credit products that can help raise your credit scores, if managed properly.

Credit Cards

Many credit unions offer credit cards for their members. Since credit unions operate on a smaller scale than large, national credit card companies, they may offer easier approval terms. If you have had past credit problems, you may still qualify for a credit card through your credit union. Opening a credit card through a credit union will increase your available credit limit and help you build a payment history, both of which help your credit rating. Credit union credit cards also typically come with lower fees than major-label credit cards. Bankrate reports that as of 2009, the fees associated with credit union credit cards ran an average of 20 percent lower than larger banks.

Loans

Several credit unions offer auto loans. You can finance both used and new cars through a credit union. The auto loans have similar terms to a loan through a national bank, and often come with similar or lower interest rates. Financing a car can help improve your credit rating. Opening an auto loan will add to your credit mix, which factors into your credit score. Many credit unions also offer perks to their existing members wishing to open a car loan.

Tips

Using the credit products offered through a credit union will only help improve your credit if you manage them well. Pay at least your monthly minimum credit card payment on time each month. Keep the balance on your credit card low, or pay the balance off entirely each month. Make the payment on your auto loan on time each month. If you do not manage your credit card or auto loan responsibly, it will hurt your credit report and score.