The actions of a community federal credit union in Tennessee are showing how some lenders can re-evaluate subprime auto loans and help more buyers finance their vehicles. The ORNL Federal Credit Union is located in Oak Ridge, Tennessee. The credit union has nearly 150,000 members and assets of over a billion dollars. An August 2011 story from the Credit Union Times shows how this regional credit union facilitated more auto loans for more of its local customers.
Industry experts estimate that the average credit union will approve about 50% of applicants, funding around one third of their requested capital. But borrowing is problematic for those with lower than average credit scores. Many credit unions have a problem with a credit score under 640, and those who are in the 620 range can often be shut out of the auto financing market for the most part. The vast numbers of Americans with lower scores is becoming a problem as families struggle with foreclosures, job losses, and other events that can have a massive negative influence on credit ratings.
According to the Credit Union Times, ORNL used a Texas based underwriting firm called Open Lending to re-open the books on some of the potentially problematic loan applications, understanding that, for many local families, the lower credit scores were not tied to actual irresponsible financial behavior. Instead, credit union analysts blamed unemployment for some of the downturn in average credit scores.
Going back through its list of auto loan applications, ORNL was able to write a large number of loans using the open lending partnership. This is just one example of how credit unions can serve an underserved auto loan market, and how borrowers who shop around for third-party lending might be able to eventually get approved for the cars that they want to finance. If you are facing auto loan struggles because of a marginally lower credit score, look for specific lenders who will hear you out and give you a decent interest rate regardless of a lack of sparkling credit.
