How does your military community manage their financial health? Military Saves Month is coming up, and whether you decide to organize any activities on your installation or not, it’s important for Service members to stay actively involved in their finances every month, year-round. Saving money for future needs is the ultimate goal, and the use of credit is a huge factor in how much money one can put aside every month.
“Credit” Is Not a Dirty Word
Financial health depends on how you handle credit. Service members shouldn't fall into the trap of overspending and getting deep into debt. Instead, if they use credit wisely, it is reflected in their credit score.
Having a good credit rating means it will be easier for them to get loans with low interest rates. Getting a low interest rate usually means they’ll have lower monthly payments – and that means they can save more money every month!
The Credit Report
First, encourage Service members to get a copy of their credit report. They need to take a good look at it and make sure the information is accurate, complete and up to date. A copy of the report can be obtained directly from any of the three consumer reporting companies: Equifax, Experian and TransUnion. If there is a mistake in the credit report, they will have to tell the consumer reporting company (in writing) what information is wrong.
Educate Service members on the possibility of identity thieves using their information to open a new credit card account in their name. Then, when they don’t pay the bills, it affects their credit rating. This could affect their ability to get a loan, mortgage, insurance or even a job.
The All-Important Number: The Credit Score
Credit scoring is a lender’s method of determining whether to give someone credit and how much to charge them for it. A person's credit score helps predict how credit-worthy they are – how likely they will repay a loan and make the payments on time. As a Service member's information changes, so will their score. Each month, as they pay their bills, open new accounts or close old accounts, their score changes Explain the benefits of a good credit score to your community:
- They’ll get approved for loans faster.
- More credit will be available to them.
- They’ll get better interest rates.
How to Improve Financial Health
A credit score can improve, but not overnight. It requires work and consistency. The following tips can help Service members improve their credit score:
- Pay bills on time. Do it consistently, over a long period of time.
- Don’t carry high balances. How much they owe could be just as bad as paying their bills late.
- Establish a good credit history. Generally, the longer they’ve been managing credit, the higher their score.
- Avoid applying for credit if they don’t need it. Each time they apply for credit, an inquiry is made on their account. Each time an inquiry is made on their account, it’s logged on their credit report and it affects the score.
- Don’t close accounts just to improve the score. Closed accounts don’t disappear from the credit score.
If your military community has been putting off looking into their finances, it's time to learn. Lots of helpful information is available at MyMoney.gov and the Consumer Financial Protection Bureau. The FINRA Investor Education Foundation is also a good resource, with information and financial tools geared toward Service members. Check out their “For the Military” menu for topics such as credit and debt, as well as everyday finances, transition and retirement. For more information on various financial topics, browse the QuickSeries® library of guides, including Becoming Debt-Free and Be Money Smart: Investment Planning for Your Future. Need a customized outreach product? Contact us now!