It may not be top of your to-do list, but it’s worth having a think about what will happen to your credit while you’re deployed or serve overseas. Serving in the Forces comes with unexpected problems and last-minute changes that may result in you needing to borrow occasionally. By looking after your credit report, you can be confident that applying for credit will go smoothly, and that you’ll get the best deal.
The first thing to remember is that most information stays on your credit file for six years. So unlike ex-pats who move abroad for many years and return to find they have no credit history, there’s still likely to be plenty on your record (both the good and bad) when you get back.
How Serving Abroad Could Affect Your Score
Length of Time Overseas
Typically, an Army or Navy tour can last anything from nine months to a couple of years. You’re often less likely to borrow during your time away. Because of this, your credit file may be looking a little bare or have a few gaps when you get back.
This may be a particular problem if you last took out credit a long time before your most recent deployment. Some lenders may interpret these gaps or long periods without borrowing as a sign that you have gone through a difficult financial patch or run into financial trouble. This may result in your credit score dropping, making it more challenging to get approval from some lenders until it improves.
Risk of Falling Behind
If you are posted abroad, you may not always have access to a good internet connection. There may be issues with time differences or, to put it mildly, you may find yourself in hostile or remote environments at short notice. This can make it harder to keep track of payments and transfers. Being unable to make payments on time could lead to defaults and markers on your credit report, causing your score to decrease.
Some good ways to maintain credit while you’re serving in other countries is to:
- Set up a direct debit or salary deduction for any agreements you have
- Completely pay off any existing credit agreements before you go
- Check your report as regularly as possible to make sure it’s up to date and correct
The Importance of Address History
Your Credit History will continue as usual if you’re still repaying your mortgage on your UK property while serving overseas. However, if you do not have a permanent UK address, you can use the BFPO for your location. Credit reference agencies now recognize BFPO addresses as valid for your report.
What you can do about it
Stay on Top of Your Repayments
The best way to improve your credit score is to ensure you are repaying your loan or credit agreements on time and within the agreed conditions. As we mentioned before, this might not always be easy while abroad due to time differences, internet availability, and other complications.
To avoid missing or being late with repayments, you could consider setting up:
- A direct debit so the payments are made automatically
- Salary Deduction, so repayments come directly out of your MOD salary each month
If you ever find yourself struggling to keep up, you should contact your lender as they will want to create the best solution to benefit you both. This should be particularly true if you let them know you are serving in the armed forces.
Stay on the Electoral Roll
While serving overseas, one of the main ways to improve your credit is to stay on the Electoral Roll. Even if you’re abroad, you can apply to vote with the Governments Armed Forces Register to Vote.
Show That You Are Reliable
It’s best to keep a good track record to show your reliability and good financial habits. It might sound counter-intuitive, but the more routinely you borrow and pay off credit successfully, the better your credit score will be. This is because you consistently show that you have not been a risk to other lenders. This may help when applying for large loans, e.g. mortgages or cars.
Keep up to Date With Your Report
It’s good practice to check your credit report regularly. There may be times when it has not been updated properly or when something has been added by mistake. You can also track which credit accounts you have open and cancel any credit cards you no longer need. Another way to improve your credit score is to make sure you are on the electoral roll.
Borrowing with Forces Finance
Forces Finance is a partnership between London Mutual Credit Union and the Ministry of Defence, which makes it possible to build savings and borrow at low rates, directly from an armed forces salary or pension.
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