In today’s economy, bad things have happened to good people. Now is the time financial institutions should step up and adapt.
Meet Bill and Mary. They are married, mid-thirties, and have two children. For most of their adult life they had good credit. Then the recession came and Bill, who through no fault of his own, lost his job. The predictable financial problems ensued. Fast forward two years and Bill found a new job and the household income is better than ever. Problem is, their credit has tanked and the only places that will even consider them are finance companies (can you say 27 %?) or check cashing stores where the 27% looks like a bargain.
This is a scenario that continues to be played out thousands of times across the country.
You see, the problem is that a person’s credit score has become the Holy Grail by which financial institutions make their lending decisions. In normal times, it worked fine, save for the fact that it doesn’t take individual situations into consideration. The economic upheaval of the last three years has shown us that these aren’t “normal” times, and the “normal” times aren’t going to return any time soon. If ever.
At Pioneer, we’ve taken a proactive approach and are making changes based on the new economy. We do still look at credit scores, but we have also added what we call a “Relevant” lending strategy, which asks a series of questions that go deeper than just the numbers to find out the story that goes with it. We understand that sometimes bad things happen to good people, and Bill and Mary are perfect examples. They are the same people they were before the setback and deserve a closer look.
We implemented Relevant Lending in April of this year, and it has been very, very successful for us. On the business side, we are making more loans than ever. On the personal side, we are doing what a credit union should do………..staying in the people business. It helps the members, Pioneer, and the economy…..and in this day and age, that’s a home run.
Do not take this as an indication that we are willing to bring out the checkbook for anyone with a hard luck story. We still need to run a business and protect our members’ money. However, if you have had a setback, or know someone who has, don’t be afraid to have them come in and talk with us. We’re making loans. A lot of loans. And the best part is that they go to deserving people.
