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Successful Turnarounds from Bad Credit to Good: What We Can Learn from the Borrower’s Experience

An examination into the lives of people in financial crisis and what credit unions can do to aid them to financial stability.

Executive Summary

The purpose of the research reported here was to examine the experiences of people in financial crisis, from their own point of view. This is critical information for those who hope to design programs that transform people from bad credit to good. Yet, to our knowledge, this is the first time this research has been undertaken. Professor Larry Compeau of Clarkson University conducted the study in cooperation with a credit union in the Southeastern United States that has a successful program for facilitating members’ credit transformations.

What is the research about?

Professor Compeau conducted in-depth interviews with members who had achieved turnarounds, and with staff of the credit union running this program. In addition, he conducted a number of in-depth interviews with people from a different part of the country who had experienced financial crises but did not recover from them, and in most cases declared bankruptcy. Professor Compeau employed a cutting-edge technique used for in-depth interviews on highly personal issues, to draw out the full experience of those who had recovered from a serious financial crisis, and those who had not.

What are the credit union implications?

Credit unions can't change the environment but they can offer special programs at the point of loan denial that produce a turnaround from bad credit to good credit. To do that most effectively requires first understanding members with too much debt. 

This report lifts the curtain of shame and denial in the lives of members with bad credit. Members in these circumstances often make great effort to keep their financial plight secret. Revealing these secrets makes it possible to help members make a transformation from the anguish of financial crisis to the pride and confidence that goes with good credit and the successful achievement of healthy financial goals.