Veterans and Military Members Face Unique Credit Challenges – Here’s What You Need to Know

Military personnel face unique credit challenges compared to their civilian peers. Here’s what you need to know.

Key Takeaways

Credit issues can disrupt our lives, regardless of our background or career. But recent research indicates folks who serve in the military face different credit challenges – and consequences – than their civilian peers. 

Over the past few years, the Consumer Financial Protection Bureau (CFPB) has conducted several studies to better understand the financial realities of veterans and active servicemembers. This article unpacks their findings. 

A spike in negative credit activity for new veterans

A 2020 CFPB study found that military members were two to 10 times more likely to have delinquencies or defaults on their credit report in the first six months after leaving active duty than during the six months before leaving active duty service. 

In general, those who join the military young (between 18-19) or serve for shorter periods are more likely to experience credit issues. All groups experienced a decrease in average credit scores upon re-entry, but the drop was greatest for those who served between 6 and 35 months.

The CFPB notes there is no definitive answer for why this happens. But young servicemembers are more likely than civilians to take out loans. Transitioning back into civilian life means finding new employment (plus new financial logistics) could make it harder to stay on top of monthly payments for such loans. 

How can new veterans build credit?

Delinquencies, late payments, and collections debt can stay on our credit reports for up to seven years. This means veterans’ credit issues can linger long after the shock of re-entry. Like anyone plagued by negative credit history, they may face difficulty buying a home, getting a car, or even seeking new employment. 

Financial readiness can help folks of all backgrounds prevent credit issues from happening in the first place. New veterans can take steps including:

  • Educating themselves about the US credit system to better understand how to build and maintain strong credit. 
  • Turning their new civilian expenses like rent and cell phone bills into credit builders with tools like StellarFi
  • Working with verified credit counselors to address credit issues and other financial concerns.

For current servicemembers, credit errors are a top concern.

Veterans may experience financial challenges stemming from the challenges of reentry. But active personnel have a different concern: inaccurate information on their credit reports. 

According to recent CFPB research, service members, military families, and veterans registered 250,000+ CFPB complaints in the past decade. Over 60% had to do with credit reporting and debt collection, with many indicating that investigations took too long and failed to correct erroneous information.

Veterans and military families are generally covered under a health insurance program called TRICARE. Unfortunately (and somewhat surprisingly) many CFPB complaints involved allegedly unpaid medical bills. 

In 2021, over half of servicemembers who filed medical debt collection complaints reported they did not actually owe the money in question. The CFPB report notes many of these complaints “stemmed from a breakdown in communication” between TRICARE and private healthcare providers

Negative credit information can disrupt a military career

No one likes being hounded for bills they shouldn’t owe, or being unable to get inaccurate information off their credit report. But due to their unique careers, these situations are particularly troubling to servicemembers and their families. 

According to the CFPB, “when issues with credit reporting, debt collection, or medical billing are not appropriately resolved, the consequences for servicemembers and military families can include loss of housing, separation from service, denial of security clearances, or loss of access to affordable healthcare.”

The CFPB report recommends medical providers and third-party billing agencies improve their systems for communicating with TRICARE and other veterans programs. It also suggests that medical providers and credit reporting agencies delay reporting servicemember medical debt until they’ve exhausted all other collection efforts and review a patient’s ability to repay. 

For their part, military members can protect themselves from erroneous billing and inaccurate credit information by: 

  1. Reviewing all medical bills for accuracy, keeping their healthcare account information updated, and regularly monitoring their credit reports. 
  2. Immediately respond to debt collectors to verify 1.) whether the debt is valid, and 2.) if needed, how to resolve the issue before it gets reported to the credit bureaus. 
  3. Avoid anyone charging an upfront fee to remove items from a credit report. Most reputable credit counseling services are free – and don’t make promises. 
  4. Debt collectors can contact consumers, but they can’t harass them. If servicemembers are being harassed over valid, fraudulent, or erroneous debt – they can report it to the CFPB. 

Everyone deserves Stellar credit 

Veterans and active servicemembers face unique challenges and concerns when it comes to their credit histories. With StellarFi, past and present military personnel can monitor, improve, and maintain their credit automatically.

Simply sign up and link bills like your rent, cell phone plan, or gym membership. StellarFi operates behind the scenes to turn these monthly expenses into credit-builders – improving 100% of the factors that create your credit score. 

Take a look around and join StellarFi today. 

The appearance of U.S. Department of Defense (DoD) visual information does not imply or constitute DoD endorsement.


StellarFi (StellarFinance, Inc.) and its affiliates do not provide financial, tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own financial, tax, legal, and accounting advisors before engaging in any transaction. StellarFi receives a referral fee from the partners mentioned in this article.