When you join the forces, it can feel as though you are penalised by the banks and credit providers for choosing the job you have. You are certainly not alone, particularly if you are not in married quarters, and aged under 30 years old, in feeling that it is almost pointless applying for finance. Also, the rumour around the base is that military applications are frowned upon and very difficult to get approved so things can feel stacked against you.
So, the question is, do finance companies routinely avoid armed forces?
The short answer is no… But it isn’t as clear cut as that.
Firstly, some lenders do have a blanket ban on Armed Forces applications. It is a bit of a dinosaur attitude for them to have, and there are less and less lenders these days that do so, but it is perfectly legal for a lender to choose who they lend to based on the customers circumstances. It would be illegal to not fund people based on their ethnic group, or sex, but job title is different. In the same way many lenders do not support applications from a range of employment types, such as publicans, the self-employed, footballers, and taxi drivers, it is the right of the lender to profile your employment status as part of the application and risk assessment, and equally their right to not lend to that customer based on their risk opinion of a customer’s employment. Sometimes lenders say they will in principle lend to Armed Forces personnel, but in reality downgrade the applicants score to a level that would not be considered for a loan based purely on employment type.
Another thing that can happen is that time served, together with rank, can affect an application – so if you have not been in for around 4 years, and not been made roughly Corporal or above, you could be declined simply because you do not have the required stability of employment, or appear not to be senior enough for consideration.
These lenders are not a significant part of the world these days and a more common reason for applications to be declined actually lies more so with your application than it does the lender, and the main problem… Addresses.
The process for your average new recruit is to come from a parental address, or partners address, and to go straight to barracks. Ask most people who have been in a year where they live and they will name the barracks they are at. But this doesn’t work for finance because your barracks is really a work address and it won’t give a proper search result or credit score. If you then add into the mix that you have left some of your paperwork at your parents such as a bank account still being registered there, and you will create what is called linked addresses. This can cause confusion as to where you really are, which in turn can not only reduces your credit score, but can also sometimes look as though your application is misleading or intentionally misrepresented.
Then, to make matters worse, a partner or two being thrown into the mix, with yet more addresses that you maybe have applied for a mobile phone from, or go on the gas bill, and things are really confusing. You give the bank your address which is barracks and the lender can’t get any credit information on you as it is like trying to do a residential search on a factory and the systems can’t always cope. They ask you for a previous address and you give your parent’s address, but this brings up links to your partners address, and this address suggests you have been there in between parents and barracks and have credit registered to you there, and the assumption of the computer assessing your application is that you have possibly not told the truth, maybe you are trying to hide information, and you can potentially get a big write down in your credit score as a result, which can affect whether you are approved or not.
All of this is perfectly normal for people in the forces, but these systems are not designed for the small minority of people serving, they are designed to accurately risk grade the majority of the population who are civilian. If a civilian has multiple address links it is a fair assessment that they have probably been less than truthful, or at least have very unstable accommodation, and this does present the lender with greater risk, mostly because someone who moves a lot, or has many addresses, is much harder to find if they stop paying. So the system is correct, for the majority at least, and the problem forces personnel have is not that they are a high risk, but they present themselves for finance like they are a high risk civilian.
The way to solve this is simple. Treat your barracks as your place of work, not your residence. Do not tell any creditors, banks, phone companies, lenders, credit cards etc that you are there. They don’t need to know. Pick one civilian address that you are happy with, and trust the occupants, such as a parents or long-time partner, and get every company you deal with to have a record of this address, use it as your main address, and to send you post to this address. You also need to be on the voters roll here, even if you don’t vote, so people can see how long you have lived there. It is also wise once in a while to apply for a copy of your credit report, list every address that you may have been at, to make sure all your old information is registered at your chosen address. You may have forgotten about the £200 phone bill default, but lenders will probably find it, and they won’t tell you they have, they will just decline you, so make sure every piece of credit information is at your chosen address and up to date. Getting a copy of your credit report will allow you to see what lenders see, and will give you the opportunity to tidy up any loose ends that you may have. Please see our Free Credit Check page for information on how to do this.
If you do all these things, and only use your chosen civilian address to apply for credit, you will in effect slot into the credit scoring computers in exactly the same way you would if you were not in the forces, and the decisions you get will be based on your true risk as a customer, not a falsely high risk assessment being given on your application simply because it is not an a manageable format that the credit scoring computers are set up to be able to work with.
The reason that this affects so many people under 30 is because of several factors. As you go up the ranks, get older, and in particular get married and move to quarters or buy a house, you are potentially a lower risk application based on age, income, and stability of address. You therefore become much easier to trace on the credit reference agency files as you are less likely to have multiple addresses, and you are probably moving around less. This is what the systems want to see. There is no sudden sea change like there is for motor insurance at the age of 21 and 25. It is simply more probable that as you get older and become more stable, you will better fit into credit scoring systems, so your credit score improves, and in turn it is more likely you will be approved for finance. This is a result of your natural life progression, but it doesn’t need to be this way, or happen this slowly. If you do the few things mentioned above, and stick to them rigidly, you can improve your chances of access to traditional credit services much more quickly than if you let time take its course.