What do you need to know about military credit repair? The first thing you need to know is that you do not have to pay a third party to repair your credit. The basic steps you need to take to repair your credit are things you must do yourself; pay on time, contest inaccurate or outdated information on your credit report, reduce your credit utilization, etc.
Military credit repair takes time, but the effort is worth it. How do you get started? It’s easier than you think. There are some basics to look to before getting into the more complex issues.
Credit Basics
Establishing your FICO score, also known as your credit score, depends on a set of variables that include:
- Payment History
- Available Credit
- Length of Credit
- Types of Credit
- Credit Inquiries
See how these are listed? They are presented in order of importance. Payment history makes up about 35% of the factors affecting your FICO score. Your available credit makes up about 30%, with the length of your credit history, types of credit used, and the number of credit applications you’ve made below that.
On Time Payment Are The First Step Toward Military Credit Repair
All the major credit reporting agencies (Experian, TransUnion, and Equifax) official sites have literature that says the same thing.
On-time payments are the first step toward credit repair, and you should never apply for a major line of credit such as a VA home loan, auto loan, or a personal loan without at least 12 months of consistent, on-time payments on ALL financial obligations.
Credit Utilization
Military credit repair techniques include reducing your credit use and lowering your balances to well below 50%. Don’t open new credit card accounts, and start paying down your existing credit card accounts with the goal of reducing all balances below 50% (30% is ideal) over time.
Resist The Urge To Close Accounts
This sounds contradictory to some; we are telling people to reduce their credit card use and to avoid new credit cards so why would we tell you NOT to close a credit card account? One simple reason–the age of your credit accounts makes a difference.
The older your credit accounts, the more seriously they are taken. The newest credit accounts don’t have a track record like your older accounts, and a lender can see the patterns of responsible credit use in an account with many years of records in it. Old credit accounts have more weight, it really is that simple.
Beware Of Third Party Credit Repair Promises
Remember that list we mentioned at the start of this article that lists the variables that affect your military credit? Here they are to remind you:
- Payment History
- Available Credit
- Length of Credit
- Types of Credit
- Credit Inquiries
Some people read all the advice we give here but still think they might need or want a third party to help them repair their credit. Here’s what you need to know–do NOT use ANY credit repair company that asks you to pay up front, or that promises they can remove accurate negative credit information from your account.
They cannot. Accurate credit data must remain on your report for a minimum amount of time and no amount of disputing or contesting will change that. No credit repair agency can legally remove accurate data from your credit reports. Do not be fooled.
And before we leave this topic, look at that list above and ask yourself how a third party could possibly help you with something like your payment history or the number of credit inquiries that are on your record. CAN they help?
If the data in your credit report is not ACCURATE, that’s one thing. But the data in your credit file that is not incorrect WILL remain there until it falls off the record as it is meant to.
Military Credit Repair Tips And Tricks
What we’ve discussed up to now is all basic credit repair 101. But what about your specific options as a military member? Some people at this point start talking about your benefits under the Servicemembers Civil Relief Act, (SCRA) but most of the provisions under this law have to do with interest rate caps, the ability to get out of leases or other contracts due to military service commitments, and related financial benefits.
But actually FIXING your credit is something you’ll have to find other resources for. SCRA protections can help you avoid damaging your credit, but if your credit already needs repair? Keep reading.
Fixing Your Credit Problems Means Knowing Your Credit Report
If you don’t know what your credit report says, you aren’t ready to apply for any new credit and you won’t be able to work on military credit repair properly. You are entitled to free credit reports each year, learn how to claim your free credit report via the Federal Trade Commission official site.
Fixing Your Credit Means Using Your Credit Wisely
Members of a certain generation would call the above statement a “no-duh” proposition, but in spite of how obvious that statement might be, some in the military find their credit is so problematic that they are afraid to apply for new credit or simply cannot be approved due to their circumstances.
But serving in the military means getting the opportunity to start establishing fresh patterns of responsible credit use. How?
By way of the Government Travel Charge Card Program (GTCC) which according to the Department of Defense official site for the program, “should be used to pay for ALL official travel expenses while on TDY/TAD.” Since use of this charge card is mandatory, servicemembers have the opportunity to pay on time, every time with this card and begin establishing better credit habits.
Why is the GTCC different from commercial credit cards? The balances are paid via a “split disbursement” which requires an automatic deduction from the cardholder’s bank account to pay, but also requires the servicemember to make a payment.
Using the card for official purposes means filing a travel voucher to be reimbursed for the expenses the servicemember must pay on the card.
The cardholder does not pay for official travel out of pocket, the payment cycle is predictable, and there is a system of accountability for payments that also reinforces the need to pay on time, every time.
Establishing Habits
The GTCC program helps card holders develop better credit habits, but it’s only a single credit account. You will need to take the good credit habits required for being part of the GTCC program and apply them to all your accounts.
One of the best ways to do this is to set up auto-deduct programs that will pay as many of your bills on time, hands-off as possible.
Some consumers balk at setting up auto payments. This is often because they run their finances very fast and loose, living from paycheck to paycheck and unable to afford to consistently pay all their bills every time. This is a treadmill that will keep any consumer running endlessly; get off the treadmill as quickly as possible. How to do this?
The Military And Family Support Center System
Military bases, regardless of the branch of service, feature Military and Family Support Centers that provide a variety of services including deployment assistance, relocation help, and yes, financial management.
Programs vary depending on the base, the need, mission requirements, and other variables, but in general Family Support Centers offer classes, seminars, and training in a variety of areas:
- Consumer education
- Budgeting
- Debt liquidation
- Retirement planning
- Savings
- Investment counseling
- Education and career services
- Emergency family assistance
These classes and other training can be quite helpful in a number of ways but the most important factor for some is knowing that they are not alone, that financial hardships (including credit problems) are common experiences for military families and individuals, and that you aren’t alone when seeking help. Do not pass up this free help, it could make all the difference.
The options available to you depend on many variables, but you can get familiar with the options offered by your branch of military service via the following official military resources:
- Army Community Services
- Airman and Family Readiness
- Marine and Family Programs
- Fleet and Family Program
- Coast Guard Mutual Assistance
None of the programs offered by these agencies is mandatory, but if you struggle to repair your military credit, you will definitely want to take advantage of these programs where available. Don’t pass up a free opportunity to learn more about how to repair your credit.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News