• Home
  • Military Discounts
    • Military & Veteran Discount List
    • Local Military and Veterans Discounts
    • Apple Military Discount
    • Veteran & Military Cell Phone Discounts
    • Gym and Health Club Discounts
  • Benefits
    • 10 Veterans Benefits You May Not Know About
    • Top Military Spouse Benefits
    • Medal of Honor: Benefits, History and Facts
    • Purple Heart Benefits
    • Veterans Health A to Z
  • Housing & Home Ownership
    • VA Loan Calculator
    • VA Loan Limits by County
    • VA Home Loan Guide
    • 5 Benefits of a VA Loan
    • 2022 BAH Rates
    • BAH Calculator
  • Money & Finance
    • 2022 Military Pay Charts
    • 2022 Defense Budget
    • 2022 Military Pay
    • COLA Watch 2022-2023
    • Military Pay Calculator
    • Military Pay Dates
    • VA Disability Rates
  • Jobs
    • Veteran Friendly Employers
    • Military Spouse Employment Preference
    • Veterans Employment and Training Service (VETS)
    • Security Clearance Jobs After the Military
  • Education
    • Veteran Friendly Colleges
    • Online Colleges with Military Discounts
    • Veteran Friendly Colleges Guide
    • Military Spouse Career Advancement Accounts (MyCAA)
    • Monthly Housing Allowance (MHA) for the GI Bill
    • Forever GI Bill
  • Resources
    • How to Get a Veterans ID Card
    • Veterans ID on Driver’s License or ID Card by State
    • Military ID Cards
    • Military Calendar
    • State Veteran’s Benefits
Home » Credit Basics Veterans Should Know

Credit Basics Veterans Should Know

by MilitaryBenefits

What does it take to get good credit when you are joining the military? And what does it take to leave military service with a good credit record and a higher FICO score? For some parts of this financial management equation, the simplest answers are absolutely right and a great place to begin.

Credit Basics Veterans Should Know Before Signing Up or Getting OutBut getting and keeping a good credit rating is more complex than just paying your bills and not abusing your credit. Fortunately there are programs offered by all branches of service that can help you add to your current efforts to build or maintain your credit.

Signing Up And Getting Out: Both Require Financial Prep

When many new recruits join the Army, Coast Guard, Air Force, Marine Corps, or the U.S. Navy, they do so anticipating a steady government paycheck and (for some) an end to some kinds of financial uncertainty.

But when you join or leave the military, there are some things that can trip you up creditwise; being aware of them when you enlist or separate from active service will help you go a long way toward preventing future problems.

Some Basic Pitfalls To Avoid Like The Plague

That headline sounds a bit extreme, doesn’t it? But late and missed payments are among the leading causes of credit score damage according to the three major credit reporting agencies. Among the biggest problems in this area?


The Manual Payments Problem

People who still make manual payments who are retiring or separating and have to travel, especially those separating from an overseas military base who aren’t going “back home” to the U.S. right away.

In these cases, manual bill payments are a liability because it is far too easy for a detail or two (including rendering an online or snail mail bill payment) to get lost amid the packing up of your household goods, getting tickets and making travel arrangements plus working with the sponsor at your gaining base, preparing for a new job, etc.

To fully protect yourself, it’s best to anticipate delays associated with making your manual payments and plan accordingly. If you plan ahead, you won’t miss manual payments and you’ll spare yourself damage to your FICO scores as a result.

PCS Moves Can Be More Expensive Than You Realize

Some PCS moves are from less costly areas to more expensive locations. Are you taking an assignment in an overseas location where the dollar doesn’t do well against the local currency? Or are you being reassigned to high-cost areas such as Los Angeles, San Diego, Washington D.C. or New York?

Some people get into financial trouble during the transition from a cheaper place to live; anticipate these issues and consider the resources available to you to ease that transition including advance pay, or even financial relief from one of the military aid societies.

Organizations like the Air Force Aid Society, Navy-Marine Corps Relief Society, Army Emergency Relief, and others are available to help in cases where the need is greater than advance pay or other solutions. These are need-based services, and troops can also explore their on-post options for financial counseling


Financial Responsibility: Advice For New Troops

New recruits likely aren’t as informed about DoD policy on financial responsibility as those who are retiring or separating. And believe it or not, financial irresponsibility is a leading cause of military disciplinary issues.

In fact, financial problems are a serious threat to security clearances depending on the nature and severity of the issue.

Consider what the government’s own financial watchdog agency, the Consumer Financial Protection Bureau, has to say about debt management among the troops: “Military personnel who have trouble handling their personal finances can very quickly find their duty status, potential promotions and even military careers in jeopardy.”

What do new recruits need to know about joining the military? There WILL be scrutiny on your finances, especially if and when you begin using a government-provided credit card for official travel.

Any misuse or failure to pay on a government travel card can bring swift disciplinary action; expect to have more eyes on your use of credit than you are used to if you are shipping out to basic training soon.

New recruits may or may not be issued a government travel card at their first duty station; much depends on the nature of your career field and how much official travel may be required. Some career fields may not require much travel, while others may have people on the road two to three weeks a month.

With or without the added detail of having a government card, the financial responsibility portion of what those in the military sometimes call “the whole person concept” cannot be underestimated.


Financial Planning: Advice For Those Retiring Or Separating

We’ve already addressed the manual payments issue, but one area that can affect your ability to get credit as a retiree or as someone separating but not retiring? Your employment status.

Let’s say you want to apply for a home loan using your VA Loan benefit. Being approved to use the benefit does not mean you are approved for the loan; all applicants must financially qualify the same as with any other type of mortgage loan.

When you apply for the loan, one of the big areas your lender is interested in is your income and work history. If you leave military service, your ability to qualify for a loan like a house or auto loan can be compromised depending on when you choose to apply for this credit.

Getting Credit Without A Job?

Applying for credit without an employer can be tricky; retired people do it all the time but if you’re new to this concept you should research what it means to do so before you fill out any blank forms. Why?

Employment and income go hand in hand when it comes to verifying a borrower as a good credit risk. If there is no employer, the lender needs to see a tangible reason why and how the applicant can afford the loan.

This is done using retirement income, any applicable investments, savings, etc. The total amount of the applicant’s monthly cash resources are the important thing here.

Financial Planning: Retirement Versus Separating

If you are retiring from the military, chances are good that you have a savings account, a retirement plan such as a 401(k), etc. You will need complete documentation of your anticipated income once you have made the transition in order to satisfy lender requirements.

But if you are separating instead and are not yet ready to retire, the timing of your application is crucial. Why? The income factor is key. Those in highly-skilled occupations have an easier time finding a new career on the outside of the federal workforce.

That’s especially true in critically-needed areas such as education, law enforcement, medicine, etc. If you have skills that more people use and are competing in a crowded job marketplace, it may take you longer to find work.

Let’s look at an example from the FHA Home Loan rulebook, HUD 4000.1. We could cite VA loan rules instead, but VA home loans tend to rely more on lender standards, where FHA mortgages tend to have more regulations that cover a larger pool of applicants. FHA loan rules say that the lender is required to verify at least two years of employment.

Some wrongly assume that means two years with the same employer. It doesn’t have to, but if you have just started a new job and apply for a major line of credit within the same year of doing so, you risk being denied on the basis of the lender’s not being able to determine if the new job is likely to continue.

Depending on circumstances, it might not be a problem at all, but for some applicants the time spent in the current job may be a deciding factor.

Not All Credit Is Big Credit

The issues mentioned above about home loans don’t necessarily apply to smaller lines of credit, store cards, etc. But this is an area that can be dangerous, too. Just because you qualify for credit at a lower level doesn’t mean you should have or use it.

Too much credit utilization can affect your credit scores–the age of your credit accounts and how close to the credit limit you are will play a role in how your credit score is calculated.

Don’t open a bunch of new credit cards when you get back to the United States if you are getting out overseas, and avoid the temptation to open a new line of credit if you have to make a “CONUS move” instead within the United States and its territories.


About The AuthorJoe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News


Related Articles
What Can Go Wrong With Your Credit While Stationed Overseas What Credit Reporting Agencies Say About Fixing Your Credit
Tips To Save Your Credit Rating in the Military Can You Get A VA Loan With Bad Credit?
Credit Card Benefits for US Military And Spouses New Recruit Financial Mistakes

Filed Under: Money

Comments

Military + Veteran Discounts

Want 30+ Mil/Vet discounts to use today? Enter your email for updates and we'll send it!
Name(Required)

VA Home Loans

Popular Articles

2022 VA Disability Rates

2022 Military Pay

Military Pay Calculator

VA Loan Calculator

2022 BAH Rates

Search Veteran.com

Military Benefits Logo

Company

  • About
  • Contact Us
  • Add a Discount
  • Privacy Policy
  • Terms of Use
  • Disclosure
  • Unsubscribe

Quick Links

  • Home
  • Military Discounts
  • Benefits
  • Housing & Ownership
  • Money & Finance
  • Employment
  • Education
  • Resources

Connect With Us

  • facebook
  • instagram
  • pinterest
  • twitter
  • youtube
Copyright © 2022 Three Creeks Media, LLC

Veteran.com is a property of Three Creeks Media. Neither Veteran.com nor Three Creeks Media are associated with or endorsed by the U.S. Departments of Defense or Veterans Affairs. The content on Veteran.com is produced by Three Creeks Media, its partners, affiliates and contractors, any opinions or statements on Veteran.com should not be attributed to the Dept. of Veterans Affairs , the Dept. of Defense or any governmental entity. If you have questions about Veteran programs offered through or by the Dept. of Veterans Affairs, please visit their website at va.gov. The content offered on Veteran.com is for general informational purposes only and may not be relevant to any consumer’s specific situation, this content should not be construed as legal or financial advice. If you have questions of a specific nature consider consulting a financial professional, accountant or attorney to discuss. References to third-party products, rates and offers may change without notice.

Advertising Notice: Veteran.com and Three Creeks Media, its parent and affiliate companies, may receive compensation through advertising placements on Veteran.com; For any rankings or lists on this site, Veteran.com may receive compensation from the companies being ranked and this compensation may affect how, where and in what order products and companies appear in the rankings and lists. If a ranking or list has a company noted to be a “partner” the indicated company is a corporate affiliate of Veteran.com. No tables, rankings or lists are fully comprehensive and do not include all companies or available products.

Editorial Disclosure: Editorial content on Veteran.com may include opinions. Any opinions are those of the author alone, and not those of an advertiser to the site nor of Veteran.com.