The Unique Credit Issues Affecting Veterans And The Answer To Overcoming Them


When it comes to reintegrating into society, veterans are not only facing employment and adjustment hurdles; it turns out they are facing more financial roadblocks too. Financial planning and debt have never been a strong area for those who serve. According to the Military Family Lifestyle Survey,  financial stress is the number one worry affecting military families today, surpassing home relocation or mental health concerns.

As a result, 81 percent of veteran families are affected physically or emotionally. It is not just their financial literacy or emergency readiness that is being affected either. Veterans are also facing issues in a specific part of their financial health – their credit.

From dealing with limited credit histories to having higher than average debt carrying balances, the credit profile of a military person is often fraught with credit issues.

Overwhelming Reliance And Poor Management Of Credit Card Debt

Veterans are also twice as likely to carry some form of credit card debt. Further investigation into the statistics reveals that a staggering 41 percent of them have $5,000 or more in credit card debt, and at least 36 percent have four credit cards. In 2020, the average American carries 2.35 credit cards. The significantly higher averages, when compared to the civilian population, indicates several underlying credit issues facing veterans today.

Firstly, the higher credit card debt balances and carrying statistics signal the inability of many veterans to make full payments on their credit cards. In fact, 6 percent of veterans made less than the minimum payment amount on their credit cards. That represents double the figure when compared to civilian consumers.

Another possible impact on their credit stems from the increased number of credit accounts military veterans have open. Having too many open credit card accounts not only increases your risk profile to lenders, but it can also make it more difficult to manage the varying payment dates and terms. This further compounds the credit issues veterans are facing today.

Increased Susceptibility To Payday Loans And High-Interest Finance Options

More veterans are also falling victims to VA mortgage refinancing schemes. Many of them utilize this cash to pay off their high-interest credit card debt or finance living costs during the transition period. Others are being tempted by payday loans, which can cost you up to 700 percent in interest,  according to a report by CNBC.

The exorbitant interest charges only further compound the debt spiral many military families find themselves in. Another issue is the lack of information on these loan products – and the consequences of defaulting on them.

There are alternative resources and credit options out there for veterans. While those with bad credit may be tempted by the relaxed acceptability criteria that payday lenders offer, veterans can use comparison guides and websites including to get more information on alternatives like installment loans before applying. They can then access the best interest rates and the true cost of these credit options.

Frequent Moves Create Barriers To Accessing Credit And Better Interest Rates

The constant moving around experienced by veterans and their families throughout their careers can also wreak havoc on their credit. While your address does not impact your credit score, often relocation can project an image of instability. For those that move to another country during tours of duty,  they are given a blank credit slate.

Therefore, even if they spend years building up a good credit profile overseas, it has little or no bearing on their ability to be approved for credit once they return to the USA.

Another result of the constant moves and the impression of instability is higher interest rates. For those that choose not to use VA loans to purchase their home, lower credit score, gaps in credit history, and higher debt to income ratios continue to influence the interest rates they are offered.

Another part of the puzzle lies with better financial education and training. While applying for a credit card can help veterans who are transitioning to civilian life improve their credit score, there is a balance that must be maintained between responsible borrowing and racking up too much debt.

There is always a cost to borrowing. However, with better tools and information, many veterans can make better credit decisions – and overcome the hurdles blocking their financial aspirations.

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