Fixing Credit: Four Ways to Help Military Families Improve Their Finances

Many military members now are returning from active duty and may be looking to return to civilian life as smoothly as possible, and one vital part of doing so is taking the time to repair their credit.

However, even if one wants to rebuild credit that may have been damaged when they were serving, it can often be difficult to figure out where to begin, particularly if their previously good credit score took a significant dip during that time. But there are four simple ways to repair credit that, when taken in small steps, can do a lot of good over the course of several months, and allow military members to enjoy an improved standing overall.

Because this is a process with multiple steps, and credit can often be difficult to navigate for the uninitiated, it's important that servicemembers start with the big issues first, and work their way down.

1. Make up for late payments
While no one ever wants to make late payments into their various credit accounts, the simple fact is that for some military families, doing so is unavoidable for many reasons. And unfortunately, no excuses are going to be good enough that credit card issuers or other lenders will let even one missed deadline (it doesn't matter whether it's by a single day, two weeks, or a whole month, it all counts the same) go by the wayside. And for borrowers who make such a misstep, the cost is likely to be quite high.

The ability of a borrower to make on-time payments every month accounts for 35 percent of their credit score, meaning that even a single missed deadline can undo months or even years of diligent payments and hard work to improve credit. And even if that missed bill is paid back in full a day or two late, the borrower will nonetheless carry the blemish on their credit score for some time; usually it will take several months or more worth of on-time payments for lenders to start to believe that the mistake was an isolated incident and let a person's credit score return to anywhere close to where it used to be. Often this requires the assistance of a credit repair law firm.

2. Pay down outstanding debt
The second-biggest factor that can lead military members to have lower credit ratings is that they're simply carrying too much credit card debt. The total combined amount of their outstanding balances across all their accounts as a percentage against the limits on those cards is known as "credit utilization ratio," and it makes up another 30 percent of a person's credit score.

For this reason, those who hope to improve their score in general may want to consider the ways in which they can start paying down those debts as quickly as possible. Lenders will allow this portion of their score to be maxed out only when a cardholder has paid their debts down to the point where they account for about 30 percent of their credit limits. For instance, reducing balances on a $10,000 limit across all cards from $5,000 to $3,000 or even $2,500 will likely do a world of good. It will also take hard work and dedication to not spend on those accounts whenever possible, but the benefits will be significant.

3. Avoid applying repeatedly
One mistake that many people who have diminished credit scores might make when trying to get their finances together once again is that they apply for new credit and are rejected because of how low their score is. This isn't necessarily a problem if they do it once and then try to improve their score before applying again, but those who are repeatedly rejected for new credit will likely do some damage to their score. The amount of times a person has applied for credit in the last few months makes up another 10 percent of their score, and the more they've done so, the worse their score will be.

This is because lenders interpret repeated attempts to get new credit as being indicative of a person having cash flow problems, and therefore poses a larger credit risk. And as with late payments, the best way for a borrower to make up for the mistakes they might have made prior is to allow several months or more to pass before they apply again, which will have the dual benefit of giving them more time to repair their standing overall.

4. Check credit reports
Finally, another great way to quickly boost credit is by taking the time to order copies of one's credit reports and checking them over closely for any unfair markings which may be dragging down one's score. If any are discovered, it can be wise to work with a credit repair law firm, which may be able to help fix the problem.