The three biggest mistakes service members are making with their money: Since April is Financial Literacy Month, Joe Chesloski, a personal financial counselor with more than 20 years of business and finance experience, offered his perspective on the biggest mistakes service members make with their money — and how those mistakes can be avoided.
BE CAUTIOUS WITH CREDIT
The first mistake is not being cautious enough with credit.
Credit scores are calculated and reported by three private companies: Equifax, Experian and Transunion. These three credit bureaus have never revealed exactly how they calculate an individual’s credit score. However, they do take into consideration how many loans a person has, how long those lines of credit have been open, and how the borrower has managed to use and pay back the money they borrowed.
After adding up all the factors, these agencies assign a score that can range from 300 (the lowest possible score) to 850 (highest possible score).
Maintaining a high credit score is essential if you want to get the best interest rate, explained Chesloski. Banks, credit unions and credit card companies all examine credit scores to determine if a customer will be able to pay back the money they borrow.
“When you buy a house, a car, or even take out student loans, all they do is look at that formula and say, ‘OK this person is medium, high or low risk,'” said Chesloski.
For example, if a Soldier is looking to buy and finance a new car, and has a credit score of 800, they are more likely to pay a lower interest rate. As a result, the total cost of the vehicle will be less and monthly payments will be lower.
The opposite would hold true for another soldier with a 500 credit score.
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