How to Build Credit While on Active Duty

If you’re a member of the military on active duty, you might not spend much time thinking about your credit. However, life in the military can be financially complex. If you aren’t paying close attention, it’s possible that your credit score has dropped without your knowledge.

When it comes to credit, it’s best to take action as soon as possible. In this article, we’ll take a look at how to build credit as active-duty military personnel.

How to build credit while on active duty in the U.S.

For people wondering how to build credit as active-duty military personnel, these are a few options to help you start:

Open a Secured Credit Card

If you have poor credit or a very limited credit history, you may not be approved for a traditional credit card. However, a secured credit card can be a very useful tool to help build credit (whether you’re in the military or not). Here’s how a secured card works:

• If you’re approved, you pay the lender a refundable deposit
• That deposit becomes your credit line
• You build credit by making purchases and paying them off
• Eventually, the card issuer may refund your deposit and upgrade you to an unsecured card

With a secured credit card, the purpose of the deposit is to reduce the risk the lender takes on by extending credit to you. If you fail to pay your statement, the lender can use your deposit to cover the cost.

Try a Credit-Builder App

Credit-builder apps like Kikoff make it easy to start building credit right from your phone. Our basic credit service involves giving you a small credit line to make purchases in our store. You pay off those purchases over time, and we report your payments to all three credit bureaus.

We also offer several other tools that may help you build and manage credit:

• Rent and bill reporting to credit bureaus
• Bill negotiation
• Secured credit cards
• Free tools for disputing debts
• Credit-builder loans
• Identity theft insurance

We offer three subscription tiers, and you may upgrade, downgrade, or cancel your plan at any time and for any reason. If you have questions about our plans or aren't sure which one may be right for you, get in touch with us!

Make All Payments on Time

It’s crucial to stay on top of your payments. Unfortunately, missing even one payment can seriously damage their credit score. If your payment is so late that it goes to collections, your credit score will suffer even further damage.

Your payment history counts for 35% of your credit score, so you should make on-time payments a priority. Even if you do nothing else, establishing a history of on-time payments is very likely to increase your credit score over time.

Ask to Become an Authorized User

This may not be an option for everyone. However, if you have a friend or relative with good credit, you might ask about becoming an authorized user on the account. If you’re added as an authorized user, the data from the account shows up on your credit report, too.

If the account owner makes payments on time and doesn’t use more than 30% of the available balance on the card, having the account on your credit report may boost your score. 

However, you shouldn’t ask just anyone if you can become an authorized user on their account. If they fail to make payments on time or otherwise mismanage the account, your score could actually decrease.

How credit works for active duty military

Military life comes with challenges that can make it hard to improve your credit score. For instance, if you have to move frequently, you might find yourself putting more expenses on your credit cards and driving up your total credit utilization rate.

If you’re paying off credit cards or other debts while deployed, it’s easy to miss a payment. Even a single missed payment can have a significant adverse impact on your credit score.

Fortunately, the Servicemembers Civil Relief Act (SCRA) grants members of the military financial protections. While these protections may not have a direct impact on your credit score, they may make it easier to avoid significant debt (which can then damage your credit score). These are some of the main provisions of the SCRA:

• Pre-service debts (including car loans, credit cards, and mortgages) have an interest cap of 6%
• The ability to terminate leases/phone contracts if your orders require it
• Protection from foreclosure or eviction under certain circumstances

It’s important to take advantage of protections like these. Those wondering how to build credit as active-duty military personnel should know that lenders generally won’t offer these protections (like the 6% interest rate cap) automatically. You need to ask for them.

Common Mistakes to Avoid

People wondering how to build credit as active-duty military personnel should be especially wary of these common mistakes:

• Not taking advantage of SCRA protections
• Not making payments on time
• Using more than 30% of your available credit
• Failing to monitor your credit score

When possible, take steps to simplify good credit habits for yourself. For example, if you put your bills on autopay, you won’t have to worry about accidentally missing a payment.

Conclusion

We know that as an active-duty member of the military, you don’t have much spare time. Kikoff makes it easy to boost your credit score with very little time investment.

Get started with Kikoff today to create or add to a positive payment history on your profile.