Good credit is more important than you might think. From getting a good job to renting an apartment, having good credit is essential. You've probably seen the goofy commercials about credit scores and reports, like the one with the couple that has to live in their parents' basement. The ads are supposed to be funny, but bad credit is far from funny when you think about how it can affect your life. Your credit affects:
- Buying or renting a house
- Getting a loan
- Applying for a job
- Finding insurance
Relocations and deployments can be busy, chaotic times, and it can be easy to miss a couple of bill payments or wind up with some debt on your credit card. It might not seem like a big deal, but those two things can hurt your credit score the most.
Don't land on debt row. Make credit work for you by learning:
- How to master the basics of your credit
- How credit may affect your life
- What you can do to improve your credit
- How to report fraud
Read More »
1. What is credit?
- Name
- Birth date
- Social Security number
- Current and previous addresses
- Employment information
- Record of all loans and credit accounts for the past seven years
Your credit score is usually a number between 300 and 850 that's based on your credit history, which includes:
- Credit card activity
- Mortgage debts
- Car loans
- Amounts owed
- Missed payments
- Defaulted loans
- Bankruptcy
Lenders, employers and landlords use this score to determine how risky it might be to loan money to you - meaning they decide whether or not you'll repay a loan. The higher your score, the lower the risk to them.
2. How does a bad credit score affect me?
Believe it or not, bad credit impacts more than just your ability to use credit cards. Things you might face if your credit is bad are:
- Trouble finding a high-level or high-paying civilian job
- Loss of a security clearance
- Loss of pay and/or working hours
- Difficulty renting an apartment or house
- Limited access to credit
- Higher interest rates
- Trouble purchasing insurance
- Difficulty applying for a cell phone
3. How can I get a copy of my report?
Thanks to the Fair and Accurate Credit Transactions Act, you can get a free copy of your credit report once a year from each of the three main credit reporting bureaus: Equifax, Experian, and TransUnion. It's easy to get your report from AnnualCreditReport.com, the bureaus' official site for free credit reports. When you get your reports, look them over carefully for mistakes or possible fraudulent activity. Call the credit bureau if there's anything you don't understand or if anything looks suspicious. Watch your back and protect yourself from fraud by monitoring your credit report regularly.
For security reasons, you can't download your report from AnnualCreditReport.com if you're stationed outside the United States or deployed overseas. Order your report by mail by printing this form: Annual Credit Report Request Form.
4. How can I improve my score?
- Check your credit report annually. There's no excuse for not checking your credit report when it's free for everyone once a year. Be familiar with the three credit bureaus: Equifax, Experian and Trans Union.
- Get in the habit of saving for the future. Budgeting for emergencies can keep you from going into debt during a bad time.
- Record your monthly spending. Write down how much money you need each month for your monthly bills such as mortgage or rent, utilities, and groceries, and how much you spend on entertainment and clothing.
- Create a new spending plan. Subtract your monthly expenses from your monthly income to see what you have left. Use that number to figure out how much you can pay on your debt each month.
- Make a list of your "bad debts" and all the interest rates. Pay off the debt with the highest interest rate first while continuing to pay at least the minimum payment on each of your other debts.
5. How do I fix mistakes on my report?
You have the right to dispute any mistakes you might find on your report and try to have them corrected. Ask the credit bureau for a dispute form, fill one out online through the credit bureau's website or send a letter with your suggested corrections. It's the credit bureau's responsibility to prove that the information is correct — it's not your responsibility to prove that it's wrong.
If the bureau investigates and agrees that a mistake was made on your record, the bureau will fix it. If there's a dispute over an error, or if you think that someone has stolen your identity and is using your credit, be prepared for a long period of back-and-forth communication with the credit bureau and your creditors. If this happens to you, be sure to keep detailed records of letters and conversations, and be persistent about following up.
6. Where can I go for help?
If you're having credit problems, it's not too late. You can repair your credit, though it's not a quick fix. As a service member, there are special protections for you and your family, including counseling on issues such as budgeting, spending plans, debt consolidation and much more.
- Installation Personal Financial Management Program. Personal financial counselors can provide education and counseling services on topics such as credit use and abuse, spending plan development, debt liquidation, financial goal setting and more. To contact your local program, visit MilitaryINSTALLATIONS.
- Military OneSource. Personal financial counseling is available through Military OneSource at 800-342-9647. Counselors can provide one-on-one help with budget development, debt consolidation, housing issues and money management.
- Consumer Financial Protection Bureau. CPFB devotes an entire section of its website to military members and their families, and the particular financial concerns they may have.
7. Is credit repair right for me?
If you have a poor credit rating, you may be tempted by claims from companies that offer to help you create a new credit identity or boost your score by removing bankruptcies, judgments and liens from your file. Don't take the bait. Credit repair services push a seemingly magical solution, but what they actually do is take your money and then fail to deliver on their promises. Unfortunately, there's no such thing as a quick fix when it comes to bad credit.
8. How do I avoid scams?
A legitimate credit repair company can help you fix errors in your credit report, let you know your legal rights and tell you what actions you can take yourself, all without charge. Warning signs that a credit repair company is acting illegally include:
- Asking for a fee up front
- Claiming to remove most or all negative information in your credit report
- Suggesting you create a new credit identity
- Saying they'll send you a nine-digit "credit profile number" or "credit privacy number" (both called a CPN) to use on loan applications
- Advising you to dispute all the information in your credit report
Report Fraud
If you've been taken by a credit repair company or were given illegal advice, there are two ways to report this fraudulent activity:
- Attorney General. Report problems with credit repair companies to your local consumer affairs office or your state attorney general.
- Federal Trade Commission. Although the FTC can't resolve individual credit disputes, it can take action against a company if there's a pattern of possible law violations. File your complaint online at ftc.gov/complaint or call 877-FTC-HELP.