NAPLES, Fla. – Credit unions, like most people, are adverse to taking risk, but one lending expert says CUs have to be more willing to take chances if they want to be known as the best. "Credit unions shouldn't just strive to be competitive, they should be known as the Wal-Marts of lending," A. Rex Johnson, president, Lending Solutions Inc., Elgin, Ill. told attendees at CUNA's Lending Council Conference that was held at the Registry Hotel Nov. 10-13. "Wal-Mart is known to consumers as being the price leader, and when people shop there they think they're getting the best price regardless if they are," he said in his presentation on "A New Way of Cross-Selling That Really Works." Instead, said Johnson, "Credit unions have fallen in love with good FICO scores," and they rely on that to determine whether to approve or reject members' loan applications. Keep in mind, he said, that one delinquency 30 days due can drive a credit score down 70 points, and a 60 days delinquency can drive the score down 100 points. "The credit score is just a tool, it should never tell you whether or not you should make a loan to a member," Johnson said. In fact, Johnson said information listed on credit reports should be in the reverse order than how it typically appears. "The credit bureaus should put the good stuff first and the bad stuff last rather than the other way around so lenders won't be immediately turned off to bad information," he said. "When a credit bureau gives you an applicant's score, they're really giving you the applicant's history, not their current credit information. The credit report doesn't show you the rate of interest the applicant was paying on a loan. You as lenders have to know what's happened most recently with that member. You have to be able to show the member how much money you can save them if they refinance or take a loan out with you," Johnson said. Given lenders' reliance on credit reports and FICO scores, CUs can use these tools to cross-sell their members. If the majority of a member's debt, for example, is in revolving debt, that will bring their credit score down. CUs should explain to members how they can help the member raise their credit score substantially through lending products such as bridge equity loans that are typically approved within 15 minutes. "Don't scan the application, build the loan," Johnson stressed. The lending professional advised attendees that "there's good and bad D and E paper, and the same is true for A and B paper. There's a right time to finance D and E paper, and credit unions have to know when to take the risk. If credit unions aren't willing to find a way to make loans to less credit worthy members, then someone else will." Johnson said there's no reason credit unions should be turning members down for loans and leaving money on the table." Credit unions are too interested in documentation and credit scores, and they're afraid their examiner will reduce their CAMEL rating if they take risk. He chastised those credit unions that have sold their credit card portfolios because they should be credit leaders. "Credit unions should be teaching their employees what it costs to say no to a member on a loan application," said Johnson. -

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