credit unions for bad credit

The 7 Best Credit Unions for Bad Credit

April 9, 2022

A credit union is a financial company that allows members with a common bond to come together and uplift each other financially. Therefore, the institutions are member-owned. You also find that most credit unions allow family members of the already existing account holders to join. These include husband or wife and children. The primary purpose of joining a Credit Union is to get a loan one day when you become an established member. I will discuss the best credit unions for bad credit later on.

Bad credit is a situation where an individual has poor credit scores. In such a scenario, one is said to have a poor loan repayment history. Some credit unions cannot accept such an individual due to the high risk involved. You may wonder how a financial institution finds out about your poor loan repayments. Well, every financial company reports borrowers to credit bureaus. These are agencies mandated by the government to keep information about borrowers. When you request a loan or line of credit, the concerned company makes a hard inquiry about your scores from the bureaus.

The good thing is that you can get a loan or a line of credit even with a poor loan repayment history. We have credit cards for bad credit and credit builder loans from various banks and credit unions. They help you grow your credit scores to an acceptable state. However, bad credit cards have high-interest rates compared to good-excellent credit scores cards. You can apply for the secured ones to avoid such high rates, and you are good to go.

How to open a credit union account?

Opening an account can either be online or at a physical branch. However, it would help if you first looked for an institution that meets your preferences. Again, you must first qualify to join the union. The following are ways you can qualify to join a credit union.

i) Share a common bond

Sharing a common bond here means that you have something in common with the existing members. For example, we have credit unions for people living within a particular place, worshiping at a particular church, belonging to a particular denomination, working in a particular company, and so on.

ii) Have a close relative in the union

Credit unions allow you to join if you are an immediate relative to a member. That can be your mother, father, or children. The criteria are the most used to enroll members into these financial institutions.

iii) Meet their contribution requirements

Credit unions have set contribution cutlines. Any member joining them must meet the said guidelines. That means you must deposit at least a certain amount of money when opening your account and that you must meet the monthly contributions. Others check your credit. However, some financial companies can get a no-credit-check credit union account.

Once you have passed the requirements, you can apply for an account. You can either apply online at the institution of your choice website or visit the nearest branch and submit your application together with the needed documents. Since credit unions are financial institutions like banks and mobile money wallets, you require;

  • Identification documents
  • Social Security Number
  • Email address
  • Phone number
  • Physical address

Your institution may ask for additional documents that you should be ready to produce when requested. For identifying documents, you can have a driver’s license, a passport, or even a state/national ID. After submitting your account application, you will receive a notification about whether you have succeeded or not.

How are credit cards similar to banks?

credit unions for bad credit

The institution’s services are almost similar to those offered by traditional banks because they offer to check and saving accounts. They also give debit cards if you request them during your application. Debit cards are payment cards that allow you to use money from your account. Also, you can get credit cards, which are payment cards that allow you to borrow money from your issuer.

Moreover, just like banks, credit unions issue loans. You can apply for a loan if you meet the qualifications needed. That means you have to show good borrowing records from the previous institutions. Remember that, just like banks, the unions usually report to the credit bureaus about all borrowers and their payment behaviors.

However, despite having similarities, we still have some differences between banks and credit unions. For example, banks charge higher interest rates on loans. On the other hand, credit unions charge lower rates to the members since they own the institutions. Moreover, banks are profit-oriented.

They charge numerous fees to the account holders to make as much money as possible. Credit unions are not profit-oriented, and their main aim is to uplift members financially. Again, banks are owned by individuals or a group of people, while the members themselves own credit unions.

The 7 best credit unions for bad credit

Various credit unions accept even people with bad credit to open accounts and later get loans and lines of credit. After careful research, I found the following institutions.

1) Affinity Plus Federal Credit Union

The institution has a 0.35% to 1.00% APY. It does not require any opening deposit and requires no monthly service fees whatsoever. It allows paper checks so that you can pay your clients on the spot without having to withdraw money from your account. Also, the institution comes with an ATM card so that you can purchase goods online as well as withdraw money from ATMs.

However, the union requires you to deposit $500 every month to earn competitive APY directly. Again, interest compounds monthly, not daily. You need to donate $25 to the Affinity Plus Foundation and open a savings account to become a member.

2) Alliant Credit Union

Alliant Credit Union is among the best credit unions in California and has an APY of 0.25%. It requires no opening deposit and no monthly fees whatsoever. Again, you can get an ATM card and get $20/month when you use out-of-network as ATM fee refunds.

The platform charges no overdraft fees nor incoming wire transfer fees at all. The only major disadvantage with the union is that it compounds its interest monthly instead of daily and charges a $25 outgoing wire transfer fee.

You can join the union if you join Foster Care to Success, a non-profit organization that deals with fostering youth. People working in certain parts of Illinois or belonging to eligible employers can join the union.

3) Blue Extreme Checking Account

The financial institution charges 1.00% to 2.00% APY on your saved amount. The longer you bank with the institution, the higher the interest rate. There are no monthly fees, nor will you require any minimum deposit. Again, you will not pay out-of-network ATM fees, and you can get refunds up to $28 per month in ATM fees charged by out-of-network service providers.

Unfortunately, the service has an overdraft fee of $30. Also, if you overdraw by over $1,000, the institution declines your purchase. The interest is compounded monthly, not daily. You can join the union if you donate $5 to the Blue Foundation and open the Blue Federal Credit Union Membership Share Savings Account with a deposit of $5.

4) Connexus Credit Union

The account has no minimum deposit and offers an interest rate of 0% to 1.75% APY. Also, there are no monthly service fees for your account, and you get an ATM card to withdraw money at ATM points.

Interestingly, it charges no out-of-network ATM fee since you get up to $25/month when you use out-of-network ATM fees charged by the providers. The account also has multiple overdraft protection options that you can rely on. However, you have to part with a $29.95 overdraft fee.

You can join from anywhere within the US if you make a $5 donation to the Connexus Association.

5) Bethpage Federal Credit Union

You will enjoy 0.40% to 1.00% APY when you open the Union account. It requires a $50 minimum deposit when opening your account. You can earn a high-interest rate on a certificate, checking, or money market accounts.

You can join the institution from anywhere in the US as long as you pay at least $5. Above all, it is among the best credit unions for personal loans in the country.

6) Consumers Credit Union

The union has a minimum deposit of $5. It also gives you 0.10% to 4.09% APY on your saved amount. There are no monthly fees, but you have to pay unlimited reimbursements for out-of-network ATM fees.

Unfortunately, the institution charges $10 overdraft transfer fees. Again, it has limited customer support availability. You need a one-time $5 membership fee to join the union, then open a savings account online. Anyone in the US can join.

7) Hope Credit Union

You must deposit at least $15 in your account when joining the union. The institution offers 0.25% APY and no monthly service fees. However, you do not earn interest if your balance is below $100. When you open your account, you get a free ATM card. You can join the union by paying a $10 membership fee.

Bottom line

A credit union is a financial institution that offers financial services to people with a common bond. It is owned by the members themselves and thus charges low-interest rates on loans and lines of credit.

Credit Unions almost operate like banks because they issue debit cards, issue loans, and allow people to open checking and savings accounts. The institutions earn you high APYs on the saved amounts.  

Posted by Spencer Tierney
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Spencer Tierney is a writer and expert on certificates of deposits at transfermone.com. His work has been featured by USA Today, MSN, SF Gate, the Los Angeles Times, NerdWallet and more. He earned a bachelor’s degree in English at UC Berkeley.