The Art Of Getting A Great Credit Score In The Military

Military Benefits
U.S. Air Force photo by Lan Kim

The basics of military life can give any service member or military spouse plenty of right here, right now things to worry about. One common result is that less-than-urgent personal finance chores, like checking your credit score, can easily end up at the bottom of your priorities list.

That’s a problem, because unlike your PT gear, your credit score stays with you even after you leave the military. Your actions today are actively impacting that score.

Fortunately, if you follow these three tips early, you’ll be ready when it’s time to get a loan, rent an apartment, or apply for a better auto insurance rate.

Related: The 5 Biggest Mistakes Service Members Make With Their Money »

Try to build positive credit history.

Many people don’t think about their credit until it’s time to apply for a major loan. And when they get denied, they realize they should have been working to establish positive credit history long before the rejection notice arrived.

Getting started on the path to good credit isn’t that hard to do. You can apply for a low or no fee credit card, get a retail store credit card, choose a secured credit card or loan, or even ask family members if you can be an authorized user on their credit card account.

The goal is to only take on debt you know you can pay back. Don’t open too many accounts at once. Don’t max out your credit. Be selective, take it slow and manage credit responsibly, or you could actually end up worse off than you were before.

Be aware of where you stand.

One key to successfully building a positive credit history is being aware of where you stand. Your credit history is a formal record of how you’ve handled the money that’s been lent to you. Positive credit history gives you a better credit score.

The three major credit bureaus — Experian, TransUnion, and Equifax — use data from lenders and a few other sources to create your credit report and resulting credit scorePotential lenders then look at these records to see if you’re a good credit risk.

That’s why having no credit history is a problem, and having negative credit history is even worse. Find out what’s recorded in your history and learn your current score. Then be sure to act in ways that help improve your credit score rather than hurt it.

Pay your bills on time.

It’s no secret that timeliness is important to your career in the military. The same goes for your credit lenders: Never pay late if you don’t want to end up doing the financial equivalent of KP duty.  

Thirty-five percent of your FICO credit score — the one most lenders look at — is based on your payment history. That’s why it’s a good idea to automate bill payments, and when possible, set them up to be paid early. Don’t leave something so important to chance.

Maintaining a good payment history is one reason why learning to stick to a spending plan is so critical. With a solid spending plan, you should never wind up short or late to pay a bill. A budget helps you spend without stress and skip the hassles that money problems bring. If you have a smart plan, and you execute on it, you should not have to worry about your credit score.

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