How military personnel can pose a credit challenge

Some military personnel suffer dings to their credit rating when they serve overseas.

And that means some finance and insurance managers must spend a lot of time and effort finding lenders to finance them. It might even mean sacrificing some profit in the process, dealers say.

But the solutions to the problem are complex and often rest on the soldier.

Used-car dealer and U.S. Army veteran Monty Van Dyke knows all about bad credit. He had a 390 credit score when he was discharged in 1997, he says.

"My credit score was terrible because of deployments," says Van Dyke, co-owner of Payless Car Sales, an independent used-car dealership in Killeen, Texas. "I'm responsible for that, I understand. But some times the mental state some people are in when they're deployed is such that paying their bills is not their priority. Staying alive is."

Payless, near Fort Hood in central Texas, sells about 700 used vehicles annually; some 85 percent of them are sold to soldiers and veterans.

There are many other reasons why some military personnel see their credit rating plummet, experts say.

One reason is the soldier or other military member fails to set up an allotment. Instead, the soldier trusts someone to pay the bills while he or she is deployed, only to find that person failed to do so, says Dave Francisco, the national sales director for Vets-Cars Group in Oceanside, Calif. Francisco was a military liaison for a large dealership group close to Camp Pendleton in San Diego before becoming general manager of that group's Saturn store.

Another blow to a soldier's credit comes when he or she buys a new vehicle, gets deployed and then voluntarily allows the lender to repossess it, Francisco says.

Low credit ratings mean higher interest rates. It also means lower profits for some dealers, Francisco says. "The dealer ends up selling the car, but in the end nobody really made any money. It cost the dealer time and effort," he says.

There is no straightforward solution once the credit score is damaged, experts say. It takes a dedicated F&I officer to find lenders willing to buy the paper.

And it takes a veteran who commits to repairing his or her credit.

That's what Van Dyke did. It took him a few years, he says, but today his credit score is 817.

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