Credit unions improve credit scores

Credit unions improve credit scores

That’s just one finding of many, as NestEgg hits a new milestone; £500,000,000 of loans assessed!

Our decision engine is now processing one in every four credit union loans. That’s roughly one per minute.

These data reveal new lending insights that we’ll be sharing over the coming weeks. Some insights demonstrate the social and economic value responsible lenders, like credit unions, are providing. For example, the positive impact on credit scores.

Repeat borrowers have scores 10% higher

We looked at 18,000 credit decisions from November 2021 and November 2022. Using the same group of community lenders from Great Britain we compared the credit scores of new and existing borrowers.

Existing borrowers’ credit scores are, on average, 10% higher than borrowers who have just joined a credit union.

78% of new members accepted for loans have a very poor credit score. (That’s a TransUnion credit score under 560). That’s 10% worse than existing members

Whilst just 5% of new members have a good or excellent credit score, this rises to 12% for existing members.

Moreover, the longer someone is a member, the better their credit score. The proportion of existing borrowers with good or excellent credit scores doubled between 2021 and 2022.

Paying back a loan increases a credit score. Moving away from payday and other subprime lenders can help. Existing members have fewer recent defaults or County Court Judgments.

Its clear that credit union’s financial inclusion objectives are delivering results. Credit unions improve credit scores.

We’ll be delving into this further so we can better understand the wider credit behaviours (both positive and negative) of short and longer-term credit union borrowers. This will help improve credit decisioning rules, better articulate the benefits to stakeholders and inform content and tips for users of our new broker platform.

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