The Military Member’s Guide to Fixing Bad Credit

Posted by Mary Davis on Jul 25, 2012 in Blog, Financial Tips, Guide, Military | 1 comment

Even though no one likes talking about it, one out of every five people have it: bad credit. According to Experian, about 20% of the 220 million Americans with credit files have a poor credit score (330-619). Unfortunately, between deployments, family expenses, and frequent relocations, many members of the armed forces are part of this statistic.

If this is the case for you, your financial situation isn’t as hopeless as it seems. With some diligence, dedication, and a military loan from us, you can repair your bad credit history. It’s a long road back to creditworthiness, but it’s one worth traveling and these tips can help get you back on track!

TIP #1: Check your credit report.

photo provided by Rebecca

Everyone is entitled to one free credit report per year. Check your report so you know where you stand and ensure that everything is accurate and that all credit accounts belong to you. If you find an error, report it to the three credit bureaus — Equifax, Experian, and TransUnion — as soon as possible. False or inaccurate information can bring your score down, and you don’t want to be penalized for these mistakes. Your credit score and history impacts whether you qualify for certain types of loans, your interest rate, and even an prospective employer’s decision to hire you.

TIP #2: Don’t avoid your bills.

If you’re behind on your bills, ignoring them will not make them go away. Avoidance is a common reaction for those who are having financial difficulties, but the best course of action is to talk to creditors, collection agencies, and other bill companies. Oftentimes debtors will be understanding of your situation and happy to work out a payment plan with you. Once you are current on all your payments, make sure to pay your bills on time…every time. Your payment history accounts for about 35% of your credit score, according to FICO.

TIP #3: Don’t close un-used credit cards to raise your score.

photo provided by Images of Money

Closing un-used credit cards as a short-term strategy for raising your score may seem like a good idea, but it’s not. The length of your credit history accounts for 15% of your score, according to FICO. For example, if you have three credit cards that are 10, seven, and five years old respectively, and you close the one that’s 10 years old, you are decreasing the length of your credit history by three years. You don’t need that blow to your credit. Instead, continue using the card for small purchases, and pay off the balance each month. This will not only preserve your credit score, but also help rebuild it.

TIP #4: Get help.

If you’re buried in debt and your credit score is on a downward spiral, don’t be too proud to ask for some help. The Soldiers’ and Sailors’ Civil Relief Act provides reduced interest rates on mortgages and credit card debt. It can also protect you from eviction if your rent payments are $1,200 or less per month, or delay civil court actions, such as divorce proceedings, bankruptcy or foreclosure. Legal help is also available through the Armed Forces Legal Assistance department if you need assistance handling collection agencies or other legal matters.

A bad credit score can make your financial life a challenge, but it doesn’t have to be a permanent struggle. If you’ve fallen into a financial tailspin, Just Military Loans has military loans for bad credit, as well as helpful tips on understanding how your score impacts your finances. By taking the necessary steps to improve your credit and staying on top of your finances, your credit score will go up and your financial future will be bright again!

Do you have another suggestion on managing bad credit? Want to share a success story about how you improved your score? We would love to hear your thoughts!