It takes patience to rebuild a military credit score, but the effort is very much worth it. Both servicemen and retired military members must understand that they have various alternatives for financial assistance with their liabilities, loans, credits, and financial affairs. This article will explain how service members and veterans can begin leading a debt-free life with a few simple steps.
Military Financial Statistics
According to an American Consumer Credit Counseling survey, veteran personal finances statistics vary from civilian finances.
A National Foundation for Credit Counseling (NFCC) did a poll in 2014, sponsored by Wells Fargo and conducted by Harris Poll, to examine military personnel's financial readiness. It was revised again in 2020. Comparing the polls helps uncover trends and supports emphasizing relevant problems.
In 2020, 78% of active-duty service members took up loans, an increase of a few percentage points compared to 2019 (75%). The COVID-19 pandemic may have played a role in increased payday loan demand since 52% of respondents expressed trouble finding suitable lending options during the Coronavirus outbreak.
The COVID-19 pandemic reportedly left one in every five military spouses woefully unequipped financially. 51% of spouses were worried about possible income loss and stable employment because of the pandemic. During COVID-19, 51% of active service members and 38% of spouses reported using freelance work to increase their earnings.
Since then, there has been an even more significant jump. Recent economic issues may be a big factor in rising payday loan utilization, as 52% of respondents expressed trouble finding suitable loan programs.
The attitude of military personnel toward credit obligations
Military members' financial preparedness and awareness:
A poll updated in 2020 by the NFCC, sponsored by Wells Fargo, and performed by Harris Poll, evaluated the veteran's financial preparation.
Debt behavior of military families
Concerning debt behavior, a FINRA report from 2017 and a National Foundation for Credit Counseling (NFCC) survey from 2015 reveal some alarming statistics:
Best practices for fixing bad credit score as a veteran:
All three leading credit reporting agencies, Equifax, TransUnion, and Experian, apply an algorithm created by the Fair Isaacs Corporation, or FICO, to determine an individual’s credit score. Factors that contribute to the FICO score include:
Length of Credit
Types of Credit
The initial move in credit repair is making timely payments. Hence you must not request a credit line, like a housing loan, car loan, or personal loan, until you have made regular, timely payments for all your financial commitments for a minimum of 1 year.
The report should contain accurate credit information for at least some time. Credit repair companies cannot delete genuine legal information from your credit reports, so keep this in mind if you intend to hire one.
Limiting your credit usage and bringing your totals down to under 50% are a few genuine military credit repair measures. Limit your credit card balances to under 50% over time by not opening new accounts and begin paying back your existing bills.
Your credit accounts are of greater importance the longer they are in use. When examining a credit account with several years of information, a lender can identify habits of careful credit usage. Simply put, older credit accounts hold more importance.
Prioritizing Payment History and Available Credit categories
Your payment history is an aspect of your credit score with the most impact on how your score behaves. The rating algorithm establishes whether or not the borrower paid their timely payments. Over 30 days, over 60 days, and more than 90 days, delayed payments show up on the radar. The scores decline as the number of total days rise. What happens if a debt is uncleared and gets charged off or put into the collection? Well, you get a gradual decline in credit ratings.
You can define available credit as the proportion of total outstanding credit balances to the credit limit allocated to your account, represented by a percentage.
About 30% of the available credit seems to be the perfect proportion. It is noteworthy to observe that in this case, ratings rise while a balance-free account will likely have minimal to no effect. What is your creditworthiness if you have never incurred any debt?
Nevertheless, as the sum rises, the credit scores would be impacted. Credit ratings will drop if the balance reaches and remains at 50%. A loan balance exceeding a credit line temporarily can severely damage your score.
The information available on the main website of the three leading credit reporting agencies, Equifax, TransUnion, and Experian, confirm this.
The first step in credit repair is making timely payments, and you must never seek a credit line if you have not made regular, timely payouts on your previous financial commitments for at least a year.
Setting up auto-deduction systems to ensure that you pay as much of your payments on time is one of the most suitable methods to achieve this. You can build a solid track record by exercising the necessary positive credit behaviors.
A history of timely payments enables you to establish credibility if you can meet the minimum payment requirements. Your credit score gets influenced by the latest payment history rather than older data.
You will not have the option of applying for new military credit or working effectively on credit repair if you do not have information from your credit report. Find out how to get your free credit score annually by visiting the official Federal Trade Commission website.
You can access free weekly credit reports online until 31st December 2023 from the three main bureaus.
Call the credit bureaus immediately if you find any inaccuracies in the report. A survey by the Federal Trade Commission found that one in every five consumers finds a minimum of one mistake in their credit history.
Veterans and active military personnel can seek help from several non-profit organizations and community programs available in their locations.
Here, we list a few below:
Unlike civilian families, military families face monetary issues such as credit card debt and repeated migrations. Several consumers claim to be unaware of where their dollars are going. Simply keeping track of your financial activities can motivate you and your spouse.
Knowing how your money gets spent is vital, regardless of the means you use to keep track of it. That may be either by documenting your purchases, maintaining a worksheet, or utilizing a tool that monitors every account. When you understand how to plan, things like budgeting and planning for the future will be much simpler for you and your household.
Being in the military allows you to form new, accountable credit usage habits.
You can start using the Government Travel Charge Card Program (GTCC). Because the utilization of this charge card is required, service members get the chance to use it responsibly and start developing healthier credit habits.
The amounts get settled using a dual payout that involves the service member payment and an automated debit payment from their bank account.
The payment cycle is consistent because of a mechanism of the payment responsibility which also enforces the obligation to pay each time, and the cardholder will not be able to spend their funds for work travel.
Military families/veterans have access to some privileges, rights, and support that can benefit them financially:
A few reasons that can negatively affect the financial goals of a veteran are unexpected deployments, disabilities, long-term PTSD, and short-notice moves. It’s hardly shocking that a lot of veterans require credit repair services.
Veterans deserve the best credit repair possible, and there is no shame in asking for help.
You can correct the credit reports through a reputable credit repair company at varying service levels for an affordable charge. Services typically consist of:
Each business sets its rates and bundles its products.
The credit repair companies look at your credit history and flaws, such as:
It takes a lot of work to fix identity fraud. Thus, many credit repair businesses provide specialized services in this area. Immediately notify the Federal Trade Commission of any suspicious activity.
Additionally, the company may send out specific letters, including:
- Goodwill letters: These are letters requesting that a late payment get deleted from your credit report.
- Cease and Desist Letters: These letters, known as cease and desist orders, ask debt collectors not to contact you.
The number of tasks the corporation will undertake in your favor each month depends on the service level you choose. Higher-priced service levels offer extra services like mobile apps, score analysis and monitoring, identity fraud repair, and money management tools.
When choosing one of the various sites that provide credit repair for veterans, ensure that you read through their accreditation. Military and Family Support Centers are located on military bases and offer a broad range of services, such as financial planning, migration assistance, and mobilization support.
Several organizations provide financial assistance, credit counseling, debt consolidation, and debt relief to military veterans. Regardless of how an individual obtains the help required, we encourage all who need it to pursue expert advice.
Online tools, including free financial education, are readily available should you seek that kind of assistance. Alternatively, you can contact the concerned institutions directly by telephone, email, or online. Hopefully, the information here will help our brave veterans and their families achieve financial independence.