For active-duty service members, maintaining good credit can be challenging. Deployments, frequent relocations, and the unpredictable nature of military life can make it difficult to monitor finances. However, protecting your credit is crucial for financial stability, securing loans, and planning for the future. Fortunately, federal laws and proactive financial habits can help safeguard your credit while serving.
Understanding the Service members Civil Relief Act (SCRA)
The Service members Civil Relief Act (SCRA) offers key financial protections for those on active duty, including:
- Interest Rate Caps: Limits interest on pre-service debt, such as credit cards and loans, to 6% while on active duty.
- Protection Against Foreclosure and Repossession: Lenders cannot foreclose on a home or repossess a vehicle without a court order.
- Lease Termination Rights: Service members can break housing or auto leases without penalty if they receive PCS or deployment orders.
To take advantage of SCRA benefits, contact your creditors and provide a copy of your military orders.
Placing an Active-Duty Alert on Your Credit Report
Identity theft and fraud can be significant risks while serving, especially during deployments. Placing an active-duty alert on your credit report notifies lenders to take extra steps before opening new accounts in your name. This alert lasts one year and can be renewed. To set it up, contact any of the three major credit bureaus:
- Experian: www.experian.com
- Equifax: www.equifax.com
- TransUnion: www.transunion.com
Monitoring Your Credit Regularly
Federal law allows service members to check their credit reports for free through AnnualCreditReport.com. Additionally, active-duty personnel can enroll in free credit monitoring services through the credit bureaus to receive alerts about suspicious activity.
Managing Debt Wisely
Deployments and PCS moves can strain finances, leading to missed payments and increased debt. To avoid this:
- Set up automatic bill payments to ensure on-time payments.
- Notify creditors and banks of address changes to prevent missed statements.
- Use military financial resources like on-base personal financial counselors or nonprofit military financial organizations for guidance.
Beware of Predatory Lending
Some lenders specifically target military personnel with high-interest payday loans and predatory lending practices. The Military Lending Act (MLA) caps interest rates on certain loans at 36% APR and bans forced arbitration clauses. Before taking out any loan, compare interest rates and fees, and seek advice from a trusted financial counselor.
The Bottom Line
Maintaining good credit while serving requires proactive planning and awareness of military-specific protections. By leveraging the SCRA and MLA, setting up active-duty credit alerts, and monitoring financial accounts, service members can safeguard their credit and ensure financial stability for the future.
For additional support, consult a financial counselor through your base or organizations like the Consumer Financial Protection Bureau (CFPB) and the National Foundation for Credit Counseling (NFCC). Your financial security is just as important as your mission—protect it wisely.
For more Financial & Legal resources tailored to veterans, visit click HERE.
Written By: HelpVet.net
Photo Credit: Canva
