When you enter the military, you’re focused on protecting your country. But give thought to guarding your credit, too.
A poor credit score can cost you dearly. You could be denied needed security clearances, pay high interest rates, get turned down for loans or credit cards and face calls from debt collectors.
Here are three wallet-protecting tips for service members.
1. Apply for a lower interest rate
Thanks to the Servicemembers Civil Relief Act of 2003, you can’t be charged more than 6% interest on debt you took on before you entered the military — or, if you’re in the reserves, before you were deployed. This rate applies to credit cards and most types of loans, including mortgages.
You can apply any time during active duty or up to 180 days after you leave active duty — but wouldn’t you rather start saving money immediately? Notify your credit card issuers and lenders in writing that you’ll be on active duty and ask them to cut your interest rate to comply with the SCRA. You’ll need to provide identification and a copy of your military orders.
The 6% cap applies only to debt incurred before you were activated. New charges on a credit card will have the original annual percentage rate applied. Still, military salaries are often modest, and getting a break on interest for existing debt can help stretch your budget. Spouses are also covered under the SCRA and eligible for this benefit.
Note that 6% is the maximum. Doug Nordman, founder of The-Military-Guide.com and author of “The Military Guide to Financial Independence and Retirement,” says some credit card issuers go beyond that, granting even lower interest rates and for longer than the period of active duty. Some service members who have applied long after their eligibility began have received rebate checks for hundreds or even thousands of dollars, Nordman says.
2. Set an active-duty alert on your credit report
An active-duty alert protects you from identity theft while serving. It requires potential creditors to take extra measures to verify that a credit application in your name is actually coming from you.
Contact one of the three major credit bureaus — Equifax, TransUnion and Experian — to request the alert. That bureau will notify the other two. You’ll need documentation of your identity and active-duty status. The alert lasts for one year but you can renew it. It also suspends prescreened credit offers for two years.
3. Catch a break when you must move
Moving is expensive, especially if you have to pay to get out of a lease. If you’re moving to join the military or because of a military obligation, the SCRA offers help.
Depending on the circumstances, you may also be able to break a vehicle lease or a cell phone contract without a budget-busting penalty or calls from a debt collector.
But you won’t get these benefits if you don’t ask for them. Military OneSource, funded by the Department of Defense, offers online guidance about eligibility to end home and vehicle leases. For help with your cell phone contract, contact your provider’s customer service department.
Nordman says you also may be entitled to a military “dislocation allowance” to help cover things you’ll have to replace — think food in your pantry and freezer or cleaning materials. You may also be eligible for an advance of up to three months’ salary and housing allowance to help cover unreimbursed expenses. Later paychecks will be lower until you offset the advance, usually over 12 months, but you can ask to stretch it to 24 months, Nordman says.