Data Facts Lending Solutions Blog

What Military Men and Women Should Know About Their Credit

by Rory Tipton

Dec 17, 2018 9:44:51 AM

Whether a person is thinking about joining the military, has been enlisted for years, or is a veteran, it’s important they think about and act to protect their credit. There are a variety of ways credit scores can be affected negatively, which then impacts the person’s ability to purchase a house, car, or even secure a credit card.

Military home buying

Military men and women face additional challenges in building and keeping their credit report clean and their credit scores high. They should proactively prepare for some unforeseen scenarios to maintain excellent credit.

First off, if you are planning to enlist, know that…

…The Military DOES Check Credit Reports

Joining a branch of service requires a check of a person’s financial strength. If an individual displays past credit history issues, it could cause him or her to be denied entry. (Keep in mind the regulations vary slightly by the branch.) What are some of these?

Overdue loans and collections. Letting debt get out of control to the point the obligations go unpaid is looked upon negatively from every branch of service. It is explained succinctly in Article 134 of the Uniform Code of Military Justice (UCMJ). Service men and women can get into trouble by not paying their debts, especially is they do it with deceit, false promises, or any other action that shows deliberate nonpayment.

Too much debt. Depending on the branch of service, if the amount of debt reported on the credit report is too large in comparison to the person’s potential military salary, that individual will be denied entry.

Find out the Top 10 Credit Mistakes and how to avoid them!

Bankruptcy. A bankruptcy doesn’t automatically disqualify a person from enlisting in the military. Several factors go into deciding whether a person would be able to serve competently and effectively. It will, however, be looked upon negatively.

Your Credit Report Can Affect Promotions

Keep in mind these scenarios don’t only affect being able to join the military, they can weigh on getting a security clearance and being able to advance in the military. Large amounts of debt can make a person desperate and more likely to perform illegal activities for money. This is a serious consideration when an individual is trying to get security clearance. A credit report is considered a valuable tool by the military to use in building a thorough profile as to a person’s overall trustworthiness and credibility.

Individuals who want to join the military, or are enlisted and hope to attain security clearance, should take these steps to protect their credit.

  1. Order a credit report. Unfortunately, credit reports can contain errors that negatively affect a person’s credit standing. People with similar names and accidental social security number typos are two common ways incorrect information ends up in a credit file. Go to annualcreditreport.com and order free copies of every bureau. Review every line and make certain you recognize the debtor and that your balances are correct. If you see errors, dispute them with the bureaus immediately to get them removed.
  2. Pay your bills on time. Set calendar alerts to ensure you make your monthly payments on time. Staying current is the simplest way to keep your finances from careening out of control.
  3. Manage your debt load. Try your best to stay out of debt. If you do purchase something on credit, make certain the payments fit into your budget. Say no to frivolous and impulsive purchases that you can’t afford to pay for with cash.

Identity Theft and Its Effect on Service Members

Knowing the importance of the credit report to a military career is the first step in protecting it. Once in the military, individuals run more of a risk to their credit than ever. That’s because identity theft is rampant. There were over 100,000 complaints of identity theft from consumers in the armed services in 2016. There are a few key reasons it’s so common.

First, the military’s version of the Equifax breach happened in 2014 when hackers scored over 21 million service members’ social security numbers.

Second, veterans are more accustomed to sharing their personal information than civilians. The Departments of Veteran’s Affairs and Defense have always identified enlisted men and women primarily by their social security numbers. Private citizens tend to guard their information more closely.

Finally, being out of pocket for weeks or months at a time is a factor. Being stationed out of the country for a lengthy period isn’t conducive to closely examining credit card statements or noticing new credit cards right away.

The Facts About Identity Theft

Being a victim of identity theft can cause trouble for an individual in a variety of ways. One of those is by ruining your credit with fake accounts and unpaid debt.

Fortunately, there are two ways folks in the military can guard against the risk of identity theft wreaking havoc on their credit, and their lives.

An active duty alert. Enlisted military men and women have the option to place an active duty alert on their credit reports to help decrease the chances of identity theft. Here’s how it works:

  • Contact one of the three credit bureaus, Equifax, TransUnion, or Experian.
  • Request an “Active Duty Alert” be placed on your credit report. This notifies creditors you are enlisted in the military and are currently on active duty.
  • The bureau you speak with is required to notify the other two bureaus.
  • If a credit report is pulled and shows an active duty alert, the lender is asked to take steps to verify the identity of the applicant before extending credit.
  • Be sure to note the date you placed the active duty alert on your credit report as it only lasts one year. After that, it needs to be renewed if the enlisted individual is still deployed.
  • The bureaus also remove those who have active duty alerts on their credit report from receiving pre-screened offers of credit. This minimizes the instances of fraudulent new credit being opened in the enlisted individual’s name.

A security freeze protects your credit, too. For extra peace of mind, service members should consider adding a security freeze on their credit report. It goes a step beyond the active duty alert in that nobody, not even the individual, can open new lines of credit without providing a PIN to the bureaus.

To freeze a credit report, an individual must:

  • Contact each credit bureau and request they freeze your credit.
  • Be ready to supply the bureaus with name, address, social security number, and any other identifying information.
  • A small fee was required in the past, but as of September 18, 2018, security freezes are free to everyone.
  • The bureaus will issue you a PIN. Keep it in a safe place because it’s required to be able to un-freeze your credit.
  • To lift the credit freeze, contact the bureaus with the PIN. Keep in mind this might take a few days so don’t expect your credit to be available immediately.
  • Security freezes on credit reports last one year.

To sum it all up, military men and women should take measures to build, tend, and maintain healthy credit. Not only does positive credit history and smart financial management help to enlist in the military, it plays a significant role in gaining security clearance that’s crucial for certain promotions.

In addition, vigilance is required in guarding against identity thieves who prey on active service members. Taking proactive steps to secure your identity is easier than dealing with stolen lines of credit, unpaid debt, and new fraudulent credit opened in your name.

Topics: Credit Report

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