CFPB Report Examines How Servicemembers Build Credit Histories

Last month, the Consumer Financial Protection Bureau (CFPB) released a report showing how credit records progress with military service for active duty servicemembers aged 18 through 24. It analyzes servicemembers who entered the service from 2007-2015, how much time they spent on active duty, and compares their credit profiles to that of non-military citizens.

Servicemembers typically need different types of credit than civilians, and usually have access to very specific credit products. They often enter the military around the same age as they begin to build a credit record, and they have to maintain healthy financial profiles to stay in the military.

The report found that “servicemembers were more likely than civilians to have had an auto loan or a credit card, and less likely to have had a student loan or debts being collected by a third-party agency.” They were also more likely to have had personal installment loans.

Three to six months after entering the military, servicemembers started opening credit accounts, the study found. Nearly 75 percent of young members have had an auto loan by age 24, while more than 90 percent have had any type of revolving credit.

The report also found that servicemembers who stay in the service longer maintain stronger credit histories, while credit scores tend to decrease after leaving the military. When they stay in the military longer, they typically have fewer delinquencies and higher credit scores. Upon leaving, their credit scores decline an average of 20 points within six to twelve months.

The report analyzes data from the CFPB’s Consumer Credit Panel (CCP), a national 1-in-48 sample of consumer credit records, and the Department of Defense’s (DoD) Servicemembers Civil Relief Act (SCRA) database. The DoD and CFPB use this research to guide outreach programs and study gaps in financial education.

Click here to view the full report.