May is Military Appreciation Month, a time to honor the contributions of our military members. Managing finances and building their credit can be challenging for those serving in the military, especially when they are deployed and gave to spend a significant amount of time away from home.
Here are tips on how to help improve your credit during your military service so that you can establish a solid financial foundation for the future.
1. Build and Establish Credit with a Credit Card
Opening a credit card is one of the best methods to form credit. Over time, managing your credit card responsibly can help your credit score. There are many basic starter credit cards out there, including options that are geared toward military members.
If you have no credit history, you may find it hard to get approved for a credit card. In that case, you should consider getting a secured credit card, which requires a security deposit but otherwise functions just like a traditional credit card.
2. Avoid Opening Too Many Accounts at Once
Opening too many accounts can cause you to overextend yourself financially or lose track of the bills you need to pay. This can cause you to miss payments, overdraft your bank account, and even negatively impact your credit score.
When you apply for many types of credit accounts quickly, several hard inquiries may land on your credit report all at once. This can signal that you are desperate for credit and negatively impact your credit score.
Luckily, credit scoring models consider multiple applications for a single type of loan quickly as a single inquiry. So, you can shop for the best rate on a single type of loan without negatively impacting your credit score.
3. Pay Off Existing Debt
Too much debt can make it difficult to pay your bills on time every month. Paying it off faster can reduce the interest you are paying, free up your finances and help you create a positive payment history. Create a budget and determine how much you can pay your monthly debt.
4. Pay Bills on Time
Payment history is the most important factor that makes up your credit score. So, paying your credit accounts on time every month can help your credit score. You also need to make your payments on time to avoid late payments. Once a payment is 30 days late, it can be reported to the major credit bureaus and has a negative impact on your credit score 5. Check Your Credit Reports Regularly
Regularly checking your credit report can help your credit by allowing you to catch inaccuracies and identify areas where you need to improve. By checking your credit report, you can help ensure that your credit score is accurate and up to date, which is important for getting approved for loans, credit cards, and other financial products.
Additionally, monitoring your credit report can help you detect potential fraud or identity theft, which can be detrimental to your credit. To get on top of your finances, you can monitor your credit with MyScoreIQ services.
MyScoreIQ services offer real-time credit and identity theft monitoring, three-bureau credit reports, FICO® Scores, industry scores, business credit scores, and credit education resources.
5. Be Smart with Your Credit Cards
Use your credit cards wisely to maintain good credit:
- Always pay at least the minimum balance on time every month.
- Keep a low balance to maintain a good credit utilization ratio.
- Keep your cards open to support your credit history.
- Monitor your transactions and read your monthly statements to look for fraudulent activity.
- The best way to use a credit card is to pay your balance in full each month to avoid interest charges.
Maintaining good credit is crucial for military members to achieve financial stability. This can be accomplished by regularly checking credit reports for inaccuracies, being smart about using credit cards, paying bills on time, and utilizing resources available through the military.
By prioritizing these habits, service members can maintain a solid credit history that can serve them well throughout their military careers and beyond.