How to Get a Personal Line of Credit From a Credit Union

(April 2024)

How to Get a Personal Line of Credit From a Credit Union

In This Article

It’s probably no news to you that a personal line of credit gives you instant and flexible access to the money you need when you need it. However, the big question is, how do you get a personal line of credit from a credit union?

Credit unions consider several factors when deciding who qualifies for a personal line of credit. If you don’t know these factors and fix your loose ends, you’ll keep wondering why the credit union never approves your application. To get a personal line of credit from a credit union, go to your current credit union—or apply for membership in your favorite credit union—and:

  • Ensure You Have a Good Credit Score
  • Ensure You Have a Positive Credit History
  • Maintain Decent Income
  • Choose a Credit Union Lender and Apply for a Line of Credit

1. Ensure You Have a Good Credit Score

To get a personal line of credit from a credit union, maintain a stellar credit score, which is—given the circumstances—crucial to getting the line of credit you need and deserve. A strong credit score tells the credit union that you are a safe credit risk.

Unsecured personal lines of credit mean you don’t commit any asset as security to the credit union lender in case of default. The lender evaluates your creditworthiness based on your credit score. If you have a high FICO score—670 or higher—you stand a better chance of getting a personal line of credit from a credit union.

Knowing what goes into your FICO score can help you improve and protect it. Here is a list of things that contribute to your credit score:

Payment History

Your payment history substantially impacts your credit score, making up 35 percent of your FICO score. Your payment history indicates how prompt you have been with bill payments. To maintain a good credit score, it’s important to pay your bills on time—all the time.

Pay all your credit products—credit card, loan, line of credit, etc—in full. If you cannot pay in full, make the minimum monthly payments on time. No payments or late payments can damage your credit score, so do all you can to avoid such adverse events.

Amounts Owed

Amount owed—also known as “credit utilization”—is the total you owe relative to your available credit. If the amount you owe is very close to your credit limit, it affects your credit score negatively. Avoid maxing out your credit card accounts. It’s best to keep all your balances at 30 percent or less than the credit limit for each account.

Length of Your Credit History

The length of your credit history does not necessarily emphasize having a longer credit history. Your FICO score takes into account:

  • How long your credit accounts have been established—that is, the age of your oldest account, the age of your newest account, and the average age of all your accounts.
  • How long specific credit accounts have been established.
  • How long it has been since you used certain accounts.

A Mix of Credit in Use

The mix of credit in use refers to the different kinds of credit you use. Successfully obtaining and managing a diverse mix of credit can raise this aspect of your credit score.

New Credit

The number of credit inquiries you make impacts your credit score. Your FICO score considers inquiries you made for credit applications from the past 12 months. Applying for new loans or accounts puts your credit score at risk. The credit union sees you as desperate for financial help.

2. Ensure You Have a Good Credit History

To get a personal line of credit from a credit union, maintain a positive credit history, which indicates how responsible you have been with debt repayment. Keep in mind your credit providers—banks, credit card companies, collection agencies and government agencies—send your transactions to the credit bureaus for documentation.

Good credit history makes it easier for you to obtain credit from credit unions—and banks, for that matter. Conversely, a bad credit history significantly reduces your options. Here’s a practical illustration of how bad credit history can hinder you from getting a personal line of credit.

Assume you have four credit cards listed on your credit history, with details of how long you’ve had each card, your spending limit on each card, and how much you owe. You also have a mortgage and auto loan, which altogether reflect your credit history.

An unforeseen circumstance causes you to max out your credit cards, and shortly after, you apply for a personal line of credit. Your potential credit union lender examines your credit history and demands a very high-interest rate. To qualify for a personal line of credit, ensure your credit history is positive by:

  • Clearing all your existing debts: If you have any revolving lines of credit, pay them down as low as you can.
  • Paying your bills on time—all the time
  • Reducing your hard inquiries; don’t apply for too many credit products within a short time.

3. Maintain Decent Income

To get a personal line of credit from a credit union, keep a high income level.

Your income level helps you get approved for the line of credit you need—from the credit union you want. Your pay level helps a credit union evaluate your ability to repay the line of credit. Generally, the stronger you are financially, the more favorable terms you qualify for.

To get a personal line of credit from a credit union, ensure you have a stable income source or sources. When applying for a personal line of credit, disclose all your sources of income and savings to help the credit union establish you as a good risk.

4. Choose a Credit Union Lender and Apply for a Personal Line of Credit

To get a personal line of credit from a credit union, choose a lender and apply for the credit product. Check with several credit union lenders to see who offers the best repayment terms, interest rates, and length of the draw period. Also, decide the credit limit you’re seeking and then start the application process.

The application process for a credit union line of credit is much the same as applying for any loan. Go to your lender’s office to apply in person or complete your application online. The lender will require your details: name, Social Security number and employment and income details.

Conclusion

To get a personal line of credit from a credit union, ensure you have good credit and decent income. Maintain a good credit score, a positive credit history and stellar membership records with the credit union. Then choose the appropriate credit union lender and apply for the line of credit.

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