Saving your credit rating as a veteran, dependent, or military spouse is not as complex as you might think. There are five simple steps you can take to save or repair your credit no matter what situation you may be in. Some require you to be proactive, others are “set-and-monitor” solutions that can help you avoid future problems with your credit report.
Credit Rating Tip #5: Act Early
Do you anticipate a loss of income? Have you been notified of a layoff, furlough, or other income stoppage? Are you expecting financial trouble of any kind?
Don’t wait until you are no longer financially capable of making a payment in such cases–contact your creditors immediately and explain your situation and make arrangements.
Acting early can help for one very important reason–you may find your lenders less willing to report negative credit information if you have already made arrangements before missing the first payment. This is a common strategy among those who know…don’t hesitate to contact your lenders to ask for help!
You could be eligible for forbearance (agreeing to delay payments to a later date, but payments are all still due at some point), loan modification (this option doesn’t really apply to credit cards, but actual loans like your auto loan or mortgage), or some other arrangement.
The key to understanding why acting early helps so much?
If you act BEFORE missing a payment, your creditor is able to take your good-faith actions into account when deciding how to proceed. Miss one payment or more, and that is much harder to come by.
When contacting your creditors, be sure to ask what recourse is available to you from them via the Servicemembers Civil Relief Act (mil-to-mil couples likely have the biggest options here), any relief or assistance programs that may be in effect due to national or local emergencies, etc. Be sure to get ANY relief options offered to you in writing.
Credit Rating Protection Tip #4: Monitor Your Credit
Credit monitoring services are offered by third parties (including the three major credit reporting agencies) and normally for a fee.
The money you spend to actively monitor your credit is worth the expense, but before paying consider the fact that many companies (including the credit bureaus themselves) have experienced data breaches and hacking and many offer FREE credit monitoring to their customers as a result.
Ask your creditors if such options are available to you. Contact the credit reporting agencies and do likewise. You may be entitled to free credit monitoring for a year or more depending, and this is a valuable tool you can use to save your credit rating.
Tip #3: Pay Down Your Credit Cards, But Do Not Close Them Out
One big mistake military and civilian consumers alike make is to work hard to pay off credit card debt, which improves your credit score, only to close the account which can potentially hurt your scores.
Why? The age of your credit accounts is the key–the older your account is, the more clout it has on your credit report. Pay down an old account and keep it active with 100% on-time payments and your credit scores will improve.
Closing the account will hurt your credit score, avoid doing so until AFTER you’ve applied for a major line of credit and never BEFORE you get approved if you are really bent on closing the account.
Tip #2: Establish A Payment Plan
Credit repair is not terribly complicated, it’s just that consumers are dazzled by third-party credit repair advertising that makes it seem like something the consumer is not supposed to do themselves. This is NOT TRUE. Credit repair is in your hands and following some simple principles will help:
- Pay on time, every time for 12 months or more to improve your FICO scores.
- Pay down your credit card balances and reduce the amount of your monthly debt compared to your income. The more income and the less debt, the better your lender likes you; doing so also helps your FICO scores.
- Avoid “junk credit” like department store credit cards with high interest rates.
- Make a budget to accommodate the above and stick to it. You may have to cut corners for a time until your plan begins to reduce your monthly financial obligations.
- Avoid applying for new credit when trying to improve your FICO scores. Hard credit inquiries like a credit card application does tend to lower scores.
- Immediately address any delinquent accounts, missed payments, etc. Don’t delay, get an arrangement worked out as soon as possible.
One of the BEST things you can do when establishing such a payment plan? Setting up an auto-deduction on your bank account to make such payments automatically.
That means your repayment plan will be paid on time, every time if your finances permit and you won’t run the risk of being disqualified for the payment plan due to a breach of the agreement through non-payment.
Tip #1: Don’t Go It Alone When Trying To Fix Your Credit
The Department of Veterans Affairs has options for those who have indebtedness to the VA. Veteran service organizations like the VFW, DAV, AMVETS and others may offer financial counseling options.
And if you are trying to get your finances in order so you can purchase a home with a VA mortgage? Call the Federal Housing Administration at 1-800-CALL FHA to be put in touch with a HUD-approved housing counselor who can assist with advice and information on getting financially ready for a major investment like a home loan.
You can also get financial counseling, credit advice, and other useful assistance from your base Family Support Center or other base agencies.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News
