Like so many Americans, veterans can face uphill battles when it comes to their finances. Frequent relocations and deployments often take precedence over money management – understandably so – while service members are serving our country at home and overseas. When they transition out of the military, the challenges of adjusting to civilian life, finding new employment, and dealing with physical and mental health issues can further compromise financial security.
These circumstances can lead to financial mismanagement, which can negatively impact veterans’ credit scores. A survey by the National Foundation for Credit Counseling found that 58 percent of veterans carry debt from month to month (almost twice the rate of civilians); a study published in the American Journal for Public Health found that 30 percent of veterans have gone over their credit limit, bounced or forged a check, been reported to a collection agency, or fallen victim to a financial scam.
These kinds of missteps can cause short- and long-term challenges for veterans. Credit is not only a key indicator of current financial health but can also help chart the path to future security. According to Credit Karma®, a strong credit rating above 700 (on a scale of 300-850) can lead to thousands of dollars saved each year in lower interest rates and APRs (annual percentage rates). An excellent credit rating (750+) can result in savings of $230,000 in interest over a lifetime.
Since it falls a month ahead of the tax filing deadline, National Credit Education Month presents a timely reminder for veterans (and all Americans) to take stock of their finances and work to improve and maintain strong credit, a critical step to financial stability. Steps to help veterans achieve this goal include:
- Deepen financial literacy: Credit is developed across many sources. Although credit cards are the most prevalent form of credit, student loans, car loans, mortgages, and personal loans also affect your credit score. The models to determine credit scores vary slightly, but primary factors include on-time payments, debt-to-credit ratio, credit history, and the number and types of credit accounts you have.
- Request credit reports: Credit reports not only provide a snapshot of your current credit rating but also reflect key factors that impact every financial decision you make. They allow you to review all open accounts in your name and proactively identify potentially fraudulent activity and fix errors. The Fair Credit Reporting Act requires credit reporting agencies Equifax, Experian, and TransUnion to provide a free copy of your credit report once a year.
- Map out a budget: A simple spreadsheet can be a great starting point for evaluating income and expenses and establishing priorities. It can help with paying off small balances or high-interest credit cards and loans. A budget can show where you could allocate additional funds to the principle on mortgages or student loans – saving thousands of dollars over time. Free tools from sites like Mint and Level MoneySM can help even the most novice budgeter find a path to savvier financial management.
- Choose military-friendly banks and services: Many banks – including USAA® and a number of military credit unions – waive or cut fees and offer additional benefits to active duty service members and veterans, reducing the burden and cost of managing your money.
- Avoid credit scams: Be wary of deals that sound too good to be true; service members and veterans are often targeted with fraudulent offers for loans or other services. Never provide credit card information to unexpected callers, even those claiming to be from the Department of Veterans Affairs (VA) or other veterans’ groups.
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