Building credit can be a daunting task for individuals of any age. Let alone as you begin a new career in the military. As you prepare to leave for basic training and work to get your finances in order, ensuring you wisely use credit is critical to your long-term financial success. Credit is truly a situation where you never get a second chance to make a first impression.
Building credit without a credit card can often present challenges. With that in mind, we chatted with two experts (from Academy Bank and Armed Forces Bank
, respectively) to explore a common offering from most credit card issuers and only a handful of financial institutions: the secured credit card.
How to get started with a secured credit card
A secured credit card can be an incredibly useful product for new credit-builders.
A secured credit card’s spending limit is capped at a specific credit limit. It’s typically under $3,000. With this feature, people often think of a secured card as best for someone trying to limit their spending so they can dig themselves out of debt.
There are other benefits, as well. We chatted with two experts on Armed Forces Bank’s secured card product, Credit Builder
— John Baeuchle from Armed Forces Bank (Executive Vice President and Director of Military Banking) and Jodi Vickery (Executive Vice President and Director of Military Consumer Lending) — and they both enthusiastically agreed that Credit Builder is also ideal for credit seekers trying to build credit for the first time.
Baeuchle, whose niece used a secured credit card throughout her college years, says the product was “incredibly valuable” for his family.
“Most people at 18 or 19 don’t have a credit score, or a way to start building credit,” Baeuchle explained. “This product is great for a student who’s trying to get started.
“We try to encourage students to buy gas, or something small that can be easily paid off each month; in doing this, students should see their credit score go up over time. When my niece used a secured card, she had a safety net through the $500 limit—we knew she’d never go crazy in debt. When she hit her senior year, she had a great credit score, plus we can easily convert the card from secured to unsecured at any time as long as it’s paid off.”
Baeuchle also told us that the Credit Builder product requires a minimal $300 deposit to open. It can be established at an amount to meet each client's needs.
“You can make yourself very independent and self-sufficient, and you can really start building a credit history with this,” he said.
Optimizing Credit Builder
When we spoke with Jodi Vickery, she also praised Credit Builder as a hidden gem of smart spending
“I have repeatedly heard a tremendous number of testimonials from clients and associates on how [Credit Builder] has helped them establish or reestablish credit,” Vickery said. “These stories stay with you because you know it made a difference in someone’s life.”
“We’ve heard stories of how it’s allowed people that didn’t think they could ever purchase a new car or a new home to receive the opportunity to do things they didn’t think were possible—at a competitively low interest rate.”
Building Credit Stories
How can a secured credit card help build credit? Let’s review some real-world stories.
For example, one client shared that his credit score went from a 0 to 650 after 6 months of paying his secured credit card on time. “This was a huge stepping stone towards starting his financial future off on solid ground,” Vickery said. “He knew the importance of building and maintaining good credit. He had just graduated from boot camp and was transitioning into military life!”
Another client has been able to purchase a used car because of the credit foundation created by the Credit Builder product. In the past he had to go with high interest rate car dealers due to his low credit score. But recently, he purchased a vehicle from a KIA dealer after having the Secured Credit Card for 17 months.
“He feels he was rewarded for making his payments on time,” Vickery said. “He was happy we offered him a product that could assist him with improving his credit. And he informed us that because of the education and foundation the Credit Builder card and team at Armed Forces Bank provided, he makes certain to pay his bills on time and uses the automatic payment features when offered to him.”
Our final example shares the story of a client who had just joined the military and was off to his first duty station in Germany. Our Associate recommended he open a Credit Builder for $1,000 before leaving. “He followed that advice and paid off his spending every month, never going over 50% of his credit card limit,” Vickery said. Since, he was able to purchase a Mustang after using his credit card for a year in Germany. His credit score? 720. And the credit union in Germany approved his auto loan for 2.9% APR. When he came back to the states two years later, he bought a house.
How our secured credit card works
“Our secured card product allows clients to get credit reestablished at a very low minimum open balance at $300,” Vickery said. “It also allows our clients to add to that in an increment of $50 or more at any time so they can grow their credit line to meet their needs — it gives flexibility to our clients.
“We’ll also increase their credit line, dollar for dollar, with whatever balance exists in the credit card’s savings account. That’s unique, that we give our clients 100 percent credit for every dollar on deposit.”
“Lastly, we report to all three major credit bureaus each month so that our clients’ payment records get reported on a very timely basis.” (This helps build credit history
Vickery added that the most important thing is making sure that clients are paying off their balance and minimums on a timely basis. For that, setting up automatic payments can be a lifesaver.
Key credit building advice
Make those payments on time and you're well on the way to establishing a good credit score.
Subject to credit approval. Credit Builder Savings account required.