Transition and Building Credit
Transition and Building Credit
In 2014, my husband transitioned from his active-duty Army position to the Army Reserves and intended to enter the civilian workforce. However, even with a college degree, Brian was unable to find employment that could financially support our cost-of-living expenses and our existing debt. During this time, I was also enrolled in college and unable to work full time, and as a result we incurred more and more credit card debt. Unfortunately, we were incapable of making monthly payments on our auto loans and credit cards. Consequently, our credit suffered tremendously. We were forced to make settlements with some of our accounts and even considered filing for bankruptcy. When I reflect on this period of our lives, I feel regretful because we did not plan for our big transition accordingly with our preexisting debts. Due to our bad credit history, it was almost impossible to find housing or apply for another auto loan.
Luckily, Brian was inducted into the Active Guard Reserve program which opened the door for our family to get back on track financially. We wanted to start rebuilding our credit score, so we registered for a credit monitoring site, evaluated the amount of debt incurred, and made the decision to not use our existing credit accounts. After several years of making minimum payments, ceasing the temptation to open new accounts, and only spending within our limits, we finally saw an improvement on our credit scores. I still use the same credit monitoring service today to oversee our spending. Finally, we were able to buy another house last October and celebrated our first Christmas together there! Maintaining our credit profile and history is vital for our family and allows us the financial freedom we once lacked.
Kimberly, thank you for your openness in sharing your family’s experience. It must have been a very difficult time for your family. Your tip is a wonderful example of how financial missteps can be a learning experience and through time, commitment and hard work, financial stability and success is possible. Well done! Thank you for sharing this beautiful photo of your family celebrating the holidays in your new home.
Kimberly’s experiences highlight the importance of planning for transition from the military and managing debt. Transition from service is an exciting time, but it can also be very challenging. One of the best things you can do is communicate and work together with your spouse, deciding what your goals are post-military. Will you relocate, go back to school, find a civilian job, purchase a home? These are all major events so prioritize planning long before your spouse plans to leave military service. Your spouse will be required to attend the Transition Assistance Program (TAP). This seminar is open to spouses on a space-available basis, so attend with your spouse if possible! It may take a longer than expected to settle into your new life or find employment, so it is also critical to have an emergency fund to cover unexpected costs or a period of unemployment. Financial experts recommend having three to six months of living expenses saved in a separate, easily accessible account.
Managing debt is one of the most important tools in your financial security toolkit. Kimberly and her husband experience the benefits of their improved financial situation with higher credit scores and the ability to purchase a home. Paying off consumer debt may not be easy or fast, but it is worth it. Remember, credit card debt generally carries a high interest rate and is usually compounded daily. Paying off credit card debt as quickly as feasible will save you significant interest payments. Watch our video series for six steps to destroy your debt. Build a plan that works for your family and stick with it!