Credit Union Borrowers Seek More Credit Despite Lower Scores

Credit unions differentiate themselves from large banking institutions through their membership structure, community-oriented services, and flexible lending terms. New numbers from FICO suggest credit unions can continue staying true to form and even draw in applicants with some blemishes and bigger credit needs.

According to January 2025 FICO numbers, the average FICO score of credit union loan borrowers was 724, just two points below (726) that of national bank borrowers. The variation, although lower, is more significant when analyzing the loan application growth from members.

The FICO Analytics team found, “Credit union borrowers use credit more than national bank borrowers, in the form of higher debt levels, searches for new credit, and greater likelihood to have an open auto loan, mortgage, personal loan, or student loan.”

Indeed, 23% of the FICO scorable group have had an open credit account from a credit union compared to 88% for national banks.

The share of credit union borrowers with a missed payment in the last year is 20.0% vs. 17.6% for national bank borrowers. Credit union customers also carry an average credit card balance of $10,293, compared with $8,278 at national banks.

The study found that members of credit unions had a higher credit utilization rate and more credit accounts relative to customers of national banks.

FICO reported earlier that, “The national average FICO Score for credit union borrowers in the US stands at 724, one point lower than January 2023, and two points lower than January 2022.”

None of this is necessarily cause for concern. That’s a sign credit unions have restructured their lending. However, a question of risk and long-term effects remains, particularly among those with weak credit.

These trends point to the following strategies for which credit unions may want to prepare:

• These are the kinds of institutions that would rely on more sophisticated risk assessment tools to refine the evaluation of creditworthiness, particularly for those with subprime credit scores.
• Credit unions also benefit from providing enhanced financial education programming, which offers members the resources they need to develop good financial habits and attain better credit scores.
• These firms want to adapt lending programs to member credit, employing risk-based decisions to optimize credit access.

Monitoring these zones will enable credit unions to also serve low-risk consumer borrowers on a wide scale.

The difference between the two samples is evident from the greater credit demand and borrowing by the credit union members compared to the customers of the national banks.

And the different mean scores of the two samples reflects the differentiated lending policies of the institutions. Members are more likely to have personal loans and hold open credit cards.

Credit unions have not lost sight of their long-term member-based vision and still have a mission to be a benefit to the community, so they make loans available to credit-impaired borrowers.

Lending policies are not the same across credit unions, and not all credit unions will interpret this information the same.

The data indicates credit union members actively obtain credit services with lower average credit scores than customers at national banks. The environment presents opportunities as well as challenges for credit unions.

These institutions can thrive by coupling successful risk management with financial education for members looking to gain economic stability.