Financially Fit? Comparing the credit records of young servicemembers and civilians
Financial well-being, including credit history, is an important consideration in an individual’s ability to join the military as well as his or her ability to maintain a security clearance and continue in military service. This report uses a representative sample of young servicemembers’ credit reports to show how their credit histories evolve from the time they turn 18 until their mid-twenties. It also compares servicemembers to a cohort of same-age civilians.
Here are the key conclusions.
- Young servicemembers use different forms of credit than civilians, and their usage depends on the timing of military service. Servicemembers tend to take out auto loans and open revolving accounts soon after joining the military. They then often take out student loans soon after leaving. Compared to civilians overall, between ages 18 and 24 servicemembers are more likely to have an auto loan or a credit card, slightly more likely to have a mortgage, and less likely to have a student loan or a third-party collections account.
- Those who remain in service for at least five years have the healthiest credit records by age 24, even compared to civilians. These servicemembers also accrue installment debt and open revolving accounts shortly after joining the military but maintain higher credit scores than other groups. Those in this group who exit the military during the observation window do experience a decrease in credit score after separation of about 20 points but on average, by age 24 this group of servicemembers who stay for at least five years has better credit scores than civilians.
- Servicemembers who have trouble with debt generally joined at younger ages or left active duty early. For example, among those who join the military before age 20, approximately 30 percent have a deep subprime score at age 24. Of those who join before age 20 and leave within 2.5 years, 58 percent have a deep subprime score at age 24. In many cases, servicemembers’ scores drop due to delinquencies and defaults in the years after they leave the military, not during service.