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Merit Based Lending FAQ

What is Merit-Based Lending? Why is QCU offering Merit-Based Lending?
"Merit-Based Lending" means that we now offer a range of interest rates on our consumer loans. The interest rate paid by each member applying for a credit union loan is determined by his or her credit history. Members with the best credit pay our lowest rates and those with past credit problems are assigned a slightly higher rate to reflect the risk involved in their loan. Even though the rate these members will pay is higher, it will almost always be better than the loan rates they are paying elsewhere. We have introduced merit-based lending in order to serve more members. In the past, we were forced to deny loans for some members because of the perceived risk to the credit union. This is not necessarily in their best interest, because if they borrow elsewhere, they'll most likely face exorbitant rates (and higher payments) than if the credit union grants their loan request.
Will anyone know what rate I am paying for my loan? Will the loan rate I am assigned change during the course of my loan?
No. After reviewing your loan request and your credit report, your loan officer will determine what interest rate will apply to your loan. Federal privacy laws dictate that this information is not shared with anyone other than our credit reporting agency. Like all other personal information that you provide in order for us to serve you, this information is held in strict confidence. No. If your credit report is cleaned up in good time, you may be able to refinance your loan at a later date (and if possible, lower the rate). However, most loans will remain at the rate in effect when the loan was granted until paid in full. Once your credit problems are resolved and do not reoccur, your future loan requests can be evaluated based on your improved payment record.
What if a credit problem is not my fault? What else do I need to know?
In some cases, your credit report may contain an item or items that are not your responsibility. Your loan officer may be able to determine if your situation can be corrected by accepting a legal document or locating a lien removal, etc. to rectify the problem. That way, you will have the opportunity to clear up the problem before reapplying for credit in the future. When you check out our loan rates, you'll notice that they are stated "as low as X% APR." The rate given is the lowest rate available; the rate you will pay may be different based on your credit history.

When you co-sign for a loan, you are responsible for repayment if the borrower is unable to make the payments for any reason. If someone asks you to become a cosigner, make sure you are willing (and able) to take on that responsibility.
How can I improve my credit report?
When your loan officer reviews your credit request and your credit report, he or she will inform you if any of the information contained in either document affects your loan request. If you are not eligible for our lowest loan rates, you will be told why. If the information we are basing our decision on is erroneous information, we will offer you the opportunity to have the error corrected.

If the information on your credit report is not erroneous information, your loan officer will notify you of the item(s) in question and can also give you some advice as how to rectify the situation so that it doesn't affect your future loan requests.
  • Always be sure that your loan payments are made on time.
  • If you are unable to make a payment, contact the lender to discuss your options.
  • Don't apply for credit unless you really need it. Many borrowers do not realize that the amount of available credit they have also affects the perceived risk involved in granting their future loan requests.
  • Ask your loan officer for other suggestions.
  • Try to keep balances below 50% of your credit limit.
  • Fix any incorrect information immediately. This can be done by contacting the credit bureau.
Do lenders and creditors look at all three bureau reports and scores before approving a credit or loan application? Who...or what...decides if I get my loan?
Not always. Most mortgage lenders will look at all three bureaus; but other lenders will use just one bureau's report. Banks, credit card companies, auto dealers, retail stores and most other lenders that issue credit or loans use credit scores to quickly summarize a consumer's credit history, saving the need to manually review an applicant's credit report and provide a better, faster risk decision. Although many additional factors are used in determining risk, such as an applicant's income vs. the size of the loan, a credit score is a leading indicator of one's basic creditworthiness.
Does having too many credit cards affect my credit score? If my spouse has bad credit before we are married will that affect my credit score?
No, Experian credit scores do not penalize consumers for having too many credit cards. Other credit score companies do not necessarily treat credit cards in the same manner. If you hold a joint credit account, have co-signed a loan or have authorized use of another person's credit, these items could affect your score if they appear on your credit report. It's important that joint account holders or authorized users understand that their credit behavior does affect the other joint account holder or main account holder.

A credit account held solely in the name of your spouse, child or any other family member cannot impact your credit score. However, in community property states, all debt acquired during a marriage is considered a joint debt, regardless if the account is joint or in the name of an individual spouse.
Does co-signing for a loan affect my credit score? Do late payments affect my credit score?
Absolutely. All loans and credit card accounts that appear on your credit report will impact your score. Paying bills on time is generally the single most important contributor to a good credit score. Being late on any bill, for any length of time, is a possible indication of future non-payment of debt and is almost always viewed negatively by lenders. Any late payments will remain on your credit report for up to seven years.
What are the names of the credit scoring companies? Where can I get a copy of my credit report?
The three major credit scoring companies are Experian, Equifax and Trans Union. Keep in mind that your score can be different on all three companies. They each use different criteria to generate the scores so there can be some variance in the scores. For a free copy of your credit report, the website is:

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QCU offers financial products and services to individuals who live or work in Norfolk and Plymouth Counties and Dorchester, as well as their families. A $5.00 Primary Share Account is required for Membership. Quincy Credit Union NMLS ID # 407326. Quincy Credit Union ABA Routing and Transit Number: 211385297.
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