Editorial Policy

5 ways to protect your credit after military service

Tina Orem

December 31, 2014

Leaving the military can be stressful, but there's one aspect of civilian life that can particularly wreak havoc for years to come — mismanaged credit.

Veterans who aren't ready can find their credit in shambles after the military. Here are five steps to take immediately after you leave the service that will help you protect your credit.

1. Pull your credit report right away. Identity thieves count on deployed military members to be too distracted to look at their credit reports, says Tyler Gibbons, a CPA whose firm, Riser McLaurin & Gibbons, provides tax advice to military members in North Charleston, South Carolina. If errors and questionable items have been piling up on your report, “it becomes a huge mess,” he says. Pull your reports for free at AnnualCreditReport.com  and check for errors. In particular, look for accounts or addresses you don't recognize, which can be evidence of identity theft.

2. Unwind powers of attorney. Members of the military commonly give power of attorney to siblings, parents or friends so those people can handle issues that arise stateside when the soldier is deployed and unavailable to tend to them.

It's a good idea to revoke those powers of attorney after you leave the military, says Shay Prosser, the co-founder and CFO of financial education company GetItTogether, which hosts financial literacy clinics for the USO of North Carolina. Once out of the military, she said, there's less of a need for powers of attorney. “You want to make sure that you are only entrusting your financial records to people who you are going to continue a good relationship with,” she says.

3. Learn about the Servicemembers Civil Relief Act. Enacted in 2003, the SCRA (or the “Soldiers and Sailors Act”) helps members of the military avoid financial disaster while they're out doing important work. It lets courts reduce (or even waive) fines or penalties that financial contracts may impose on soldiers, and it limits the interest rate on certain debt incurred by service members.

“We don't see medical collections on military members. We see medical collections like crazy on civilians. It's an area of life [where] they might not have had to be as diligent about keeping records and now they need to.”
–Shay Prosser, GetItTogether

Many people think the SCRA is useless for civilians, but Prosser says that's not true. Even after you become a civilian, she says, negative stuff might appear on your credit from when you were in the military. But you might be able make those negative things go away with the SCRA.

“Sometimes we've seen something like somebody's had a car repossessed, and we realized that half the stuff that was done was while they were deployed,” Prosser explains.

Repossessing assets while a soldier is deployed is often not allowed under the SCRA, for example, which means new civilians might be able to get lenders to unwind negative credit events. Prosser says: “What you need to ask [the lender] is, 'Is this covered under the Soldiers and Sailors Act?'”

4. Keep track of your civilian medical records. Civilian health coverage poses a bigger threat to your credit than military health coverage does, Prosser cautions, because the coverage model is so different.

“The day they're not covered by TriCare anymore, you want them to be keeping all those receipts from when the kid goes to the doctor and making sure that nothing goes to collections and that they're keeping things well  maintained,” Prosser says.

“We don't see medical collections on military members. We see medical collections like crazy on civilians. It's an area of life [where] they might not have had to be as diligent about keeping records and now they need to,” Prosser says.

Also, be mindful of medical identity theft. Read the Explanations of Benefits from your insurance company carefully, checking them against any invoices, and periodically check your medical records at your doctor's office. Not only could medical identity theft cause you to get bills that aren't yours, but your medical information could be listed incorrectly on your charts, potentially causing misdiagnosis.

5. Get credit monitoring. “I'm not a huge fan of credit monitoring for just any old civilian, but for seniors, military and college students, I'm a fan of it,” Prosser says.

Why take this step? “A lot of times [recent veterans] are more vulnerable simply because there's so much data out there on them,” he says. “All their [military] documents basically have their Social Security number on it.”

“Military members have more moving parts in their lives than most people,” Prosser says. Using these five steps could make the transition easier.