Many veterans face financial struggles after returning to civilian life, with studies showing that around 19% are unhappy with their current financial situation.
For many, the transition from military service to a stable financial footing is challenging due to the disruptions in income, the high costs of moving, and the impact of deployment on managing personal finances.
These factors can make it difficult for veterans to meet financial goals, build savings, or achieve the credit scores they need to move forward. Addressing these financial concerns head-on can make a lasting difference, giving veterans the stability they deserve after service.
Let’s look at how to repair your credit score after military service and achieve a more stable financial future.
What is Your Current Credit Situation?
The first step to repairing your credit is understanding exactly where you stand. This means pulling your credit report from the three major credit bureaus—Experian, Equifax, and TransUnion.
By law, you’re entitled to a free credit report once a year from each bureau via AnnualCreditReport.com. Review each report for errors, outdated information, or signs of identity theft.
As military personnel are frequently the victims of identity theft, accuracy is important, especially when deployed.
Step-by-Step on How to Repair Your Credit
To help you repair your credit, we’ve gathered 9 steps you should take if you want to repair your credit score.
1. Dispute Inaccuracies and Address Identity Theft
If you spot any errors or fraudulent entries, start by disputing them with the credit bureau reporting the information. This process may require you to provide documentation to support your claims.
Correcting these inaccuracies can quickly boost your credit score if they negatively impact it. For those who suspect identity theft, taking swift action by freezing your credit and reporting the theft can prevent further damage.
2. Catch Up on Any Past-Due Accounts
Stabilizing your credit profile requires that all of your accounts be brought up to date. If you have accounts that fell behind during deployment, contact your creditors to discuss repayment options.
Many creditors offer programs for military personnel to help catch up on missed payments without penalizing credit scores. Consider negotiating lower monthly payments or requesting a hardship plan if payments are overwhelming.
3. Manage Outstanding Debts
Debt has a big role in your credit score, especially credit card debt. Focus on paying down high-interest debt to reduce your credit utilization ratio, which is the amount of credit you’re using relative to your total available credit.
Aim to keep this ratio under 30%. Tackling one debt at a time (often called the “snowball” or “avalanche” method) can make this process more manageable and less daunting.
4. Use Military Financial Programs and Resources
Numerous programs are specifically designed to help veterans and active-duty military personnel manage their finances and credit. The Servicemembers Civil Relief Act (SCRA) provides interest rate caps and other financial protections that can help manage and lower debt.
Nonprofits like the National Foundation for Credit Counseling (NFCC) offer free or low-cost financial counseling services for military members.
5. Set Up a Budget and Stick to It
Establishing a realistic budget is essential to maintaining good financial health post-service. Track your monthly expenses and set aside funds for essential payments like rent, utilities, and credit card bills.
You can rebuild your financial foundation by prioritizing debt payments and cutting unnecessary expenses. Many budgeting tools and apps specifically cater to military families, providing resources to manage finances more efficiently.
6. Open New Credit Accounts Cautiously
If you’re looking to rebuild credit, opening a new line of credit might be tempting. However, be cautious when applying for new credit cards or loans. Too many applications in a short period can signal to lenders that you’re financially unstable, which could lower your score further.
Instead, consider secured credit cards or a credit-builder loan if you’re looking for a safer way to establish a positive credit history without the risk of high debt.
7. Be Consistent with Bill Payments
The most effective way to improve your credit is by making consistent, on-time payments. Payment history accounts for 35% of your credit score, so prioritize paying your bills by their due dates.
Setting up automated payments can ensure you never miss a due date, and some financial institutions offer lower interest rates or waive late fees for active-duty members.
8. Consider Working with a Financial Counselor
If you feel overwhelmed by the process, a financial counselor can be a valuable resource. Many organizations, including the Veterans Affairs (VA) program, provide free financial counseling specifically for veterans.
These professionals can help you create a repayment strategy, manage debt, and understand your credit report, making the path to financial stability much more manageable.
9. Be Patient and Persistent
Repairing credit is a journey that takes time. Improving your credit score can take months or even years, depending on your starting point. Positive outcomes will gradually become apparent if you maintain a budget, manage your debt, and make your timely payments.
Repair Your Credit with Credit Absolute
Credit Absolute knows that transitioning from military service can come with financial challenges.
Our team can give you personalized solutions to help you achieve a healthier financial future. We’ll help you understand your credit report, develop strategic plans to manage debt, and anything else that interests you. We’re here every step of the way.
Currently, we’re offering Veterans & First Responders Discount and a free credit action plan.
Contact us and take advantage of our Veterans & First Responders Discount to receive a credit analysis and our free e-book.
