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Published: Jul 03, 2024 9 min read

Service members are favorite targets for offers from credit issuers, and these can range from your run-of-the-mill credit card pre-approvals to predatory payday or car title loans. There are many reasons why these issuers may focus on military members, and some of their products might be damaging to service members’ long-term credit history.

Read on to find out more about the unique credit challenges the military and their families can face and how to prevent them.

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The military faces particular credit challenges

While the credit landscape can be hard to navigate for everyone, there are some particular challenges for military members.

Brief credit histories

Almost ninety percent of Armed Forces recruits are between the ages of 18 and 24 — in other words, they’re right at the age where most people start building a credit history. As many are just starting out, many predatory lenders and other vendors who target borrowers with little credit or low scores — think pawn shops, used car dealers or payday lender offices — will often set up shop around military installations.

Using these loans can increase military members’ debt burden substantially as having a low credit score or brief credit histories usually equals higher interest rates, which makes paying back these debts a whole lot harder.

Credit problems can impact security clearances

But having little credit or poor scores has other consequences for military members. In some cases, it might affect security clearances as well. Because it’s believed that a less-than-stellar financial history may open service members up to bribery and coercion, poor credit and an excessive amount of debt can put members’ clearances in jeopardy. In fact, it’s one of the most common reasons to deny or take away security clearance credentials for new or active-duty military members.

Having said that, it’s important to remember that security clearance reviewers look at each investigation on a case-by-case basis, taking into consideration not just any bad marks on a given credit history, but also steps taken to improve finances.

Credit as a budget management tool

According to the American Consumer Credit Counseling, over 90% of military families have at least one credit card, as compared to just under 70% for non-military families. And 27% of service members carry $10k or more in credit card debt (only 16% of civilians do).

Further, a report by the Consumer Financial Protection Bureau found that credit challenges worsen for service members on separation from active duty. A significant portion of these either go delinquent on debt or have severe derogatory marks on their credit in the first six months after separation. The problem is more likely to turn up for members who served between seven and 35 months — having reached their first assignment but left before the end of their first contract.

How to protect your credit as a military member

Military members and their families are in a unique position in American society for a number of reasons. Below we’ll discuss some ways they can protect their credit and make wise financial decisions.

1. Get your free credit report

Aside from the regular weekly credit reports you can access at annualcreditreport.com, and the annual reports you’re entitled to from each of the three main credit bureaus (Experian, Equifax and TransUnion), as an active duty service member you can also access free scores through installation military financial educators and counselors in the military Personal Financial Management Program (PFMP). The service is offered via SaveandInvest.org.

2. Look into credit support services for the military

Military service members and their families have support services that can help with debt- and credit-related issues. These include the following:

  • Military legal assistance: Military installations usually have legal support staff, including military lawyers from the Judge Advocate General Corps (JAG). They can help with cases under the Servicemembers Civil Relief Act (SCRA).
  • Personal Financial Managers and Personal Financial Counselors (PFMs and PFCs): Military installations often have PFMs to provide financial education and counseling services, free of charge, with unlimited sessions. They are required to hold at least a bachelor’s degree and nationally accredited financial counseling certifications.
  • Military OneSource: This Department of Defense-funded program is a great resource for tax services, spousal employment help, financial literacy, and more. It provides free financial counseling both in-person and over the phone.

3. Monitor your credit and set up an active duty alert

Knowing where you’re starting from is the first step in developing and improving your financial history. Continuous monitoring will then help you minimize your risk of identity theft or fraud — you might even want to sign up for a credit monitoring service.

Additionally, the Fair Credit Reporting Act (FCRA) allows active-duty service members to set up “active duty alerts” for free. These alerts could help you catch attempts at identity theft by notifying you if anyone attempts to open new credit accounts under your name. Each alert can be placed with any of the three main credit reporting agencies and lasts for one year, renewable for the length of your deployment.

4. Limit your current and future debt

One of the factors that credit bureaus take into account when determining your credit score is your credit utilization ratio, that is, how much of your available credit you’re using. Lenders (and credit bureaus) recommend keeping that percentage below 30%. So, if you have a credit card with a $3,000 limit, a balance of no more than $900 would be ideal.

5. Watch out for predatory lending

When you’re in the market for a loan or credit card, It’s important to shop around before signing on the dotted line. A good rule of thumb is to compare at least three offers and read the fine print thoroughly. As we said above, many predatory lenders will set up show near military installations, offering payday loans or vehicle title loans with sky-high interest rates that can trap borrowers in a debt cycle.

If you need a loan, make sure to only go to reputable lenders — our list of the Best Banks and Credit Unions for Military Members is a great place to start.

6. Practice active debt repayment

While making your monthly payments promptly will help you build and establish a good credit history, there are also some things you can do to pay down existing debt quicker. Two popular debt repayment strategies are the avalanche and the snowball methods.

Credit-related laws pertaining to the military

There are two main federal credit laws related to credit purchases by service members: the Servicemembers Civil Relief Act (SCRA) and the Military Lending Act (MLA).


The SCRA is a federal law that provides additional protections for service members when they enter active duty military service, including members of the Air Force, Army, Coast Guard, Marines, Navy, Reserve members, commissioned officers of the Public Health Service or the National Oceanic and Atmospheric Administration, and activated National Guard/Air Guard (for more than 30 days).

It covers a wide range of concerns, from credit card and loan interest rates to installment contracts or rental agreements, but the main five protections it offers are as follows:

  • Interest rate reduction of any pre-service loan to a maximum of 6%
  • Protections from a default judgment in a civil action
  • Pauses or stays against home foreclosures
  • Protections against repossessions unless court-ordered
  • Termination of residential housing and automobile leases without penalty


The MLA applies to certain loans made while on active duty, rather than pre-service loans, capping the military annual percentage rate (MAPR)— the interest rate and fees creditors can charge covered borrowers — at 36%. It applies to servicemembers (including those on active Guard or active Reserve duty), spouses, and certain dependents. Note that, while the interest is capped, 36% is a very high rate compared to what many personal loans or traditional credit cards offer.

Covered products include payday loans, tax refund and anticipation loans, deposit advance products, vehicle title loans, and some student loans, overdraft lines of credit, installment loans and credit cards. It doesn’t include secured loans such as mortgages or auto loans.

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What Every Military Member Should Know About Their Credit FAQs

What happens to your credit when you join the military?

Your credit score won’t change once you join any branch of the Armed Forces. However, once you’ve enlisted, you may be subject to increased financial scrutiny, depending on your position and security clearance.

How do you build your credit score if you join the military?

The way to build your credit score when you’ve joined the military is essentially the same as for anyone else. Alternatives can include credit builder loans or secured credit cards. If you already have debt, make sure to make your monthly payments promptly and keep your credit utilization ratio low.

How can military members protect their credit while deployed?

Amendments to the Fair Credit Reporting Act allow active-duty service members to set up active duty alerts to help protect their credit. The alerts notify you if there’s an attempt to open a new credit account under your name. Another best practice is to make sure your bills are enrolled in paperless services, so that you’ll receive notifications via email rather than snail mail.

Does the military care about credit score?

While the military doesn’t have a minimum credit score requirements (unlike lenders), a low score could be a red flag on your application and affect your eligibility for certain levels of security clearance.