Banks are in the business of lending money to consumers and businesses. They are very much for profit lending institutions. The banks loan the money to consumers in return for the repayment of the principal with interest over a set period. Banking is a highly regulated industry both state and federal laws apply to banking transactions. These laws require truth in lending and equal opportunity access to lending institutions.

Credit unions are quite different from banks in one very important way. Credit unions are not for profit institutions established to help their members. Banks are generally open to the public. If you have got the money, banks will generally take it.

Although banks routinely checked credit histories, including in particular the history regarding checking accounts since customers who bounced checks can increase administrative costs for the banks.

Credit unions, on the other hand, require that members have some common affinity. This can mean that you work for the same company or live in the same geographic area. Credit union members pooled their savings and then landed to each other for cars and houses.

Credit unions have great advantages over banks for individual investors in that they can have less stringent lending requirements and much lower service fees. Although credit unions use many of the same underwriting requirements for lending the banks do, your character and willingness to repay the money you borrowed can make a difference with a credit union. Local banks are more likely to go by your credit score than whether or not they know who you are.

In both banks and credit unions, the actual process of lending the money is much the same. If you want to borrow money, you have to fill out an application that will ask fairly standard questions about your assets and job history as well as personal information designed to make sure they have the right person when they do the credit checks.

Notice in the bottom of the above Credit Union logo the words,

“Where people are worth more than money”

This is the basic sales pitch of the credit unions across America – that they will treat you as a person and not just a number. Lately in the last 5 years leading up 2009 the credit unions have become more like the conventional banks in that they putting more weight on the applicants FICO score.