Article by Jamie Mackenzie Smith - 27th December 2018

How To Take Out Credit When Overseas In The Armed Forces

It’s no secret that the number of the UK’s active military personnel is set to decline further between now and 2020, but of the 145,000 UK Regular Forces across the Army, Navy and Air Force in 2018, as many as 18,500 served overseas during that time. With the recent news that the Army will accept recruits from commonwealth countries as well, a further portion of our armed forces is likely to be based overseas in the coming years.

In addition to the sacrifices made by military personnel on a daily basis, there are more practical challenges that come with being based overseas – with a significant one being that it can be more difficult to obtain fairly standard credit facilities like credit cards, loans and even mortgages.

That’s because lenders traditionally use your current and previous addresses as the basis for their credit search when you apply. If you’ve been out of the UK for a sufficient period of time, it could mean that your credit history is missing months or years’ worth of important information, leaving lenders to struggle to find enough information on which to base their decision.

This has the potential to be a frustrating issue, but it needn’t be because there are ways you can make it easier for lenders to judge you in the right light and potentially even take out new lines of credit if you’re posted abroad.

Issues with getting credit if you’re in the Armed Forces

UK military personnel are every bit as entitled to take out credit back home as civilians are, but it’s taken the system a little while to catch up with the idea that active servicepeople might move around reasonably regularly.

This is because the information contained on your Credit Report is based on you as an individual and specific addresses you are linked to. The harder it is to find that information, either because of a lack of data or strange address formatting, the harder it is for lenders to assess you.

Lenders share information via Credit Reference Agencies on any credit agreements that you hold with them, so when it comes to assessing a new application they can see what sort of borrower you have been in the past, and draw strong conclusions as to how you’re likely to be behave in the future. It also reveals (among other things) the balances and limits of any existing credit agreements, which helps with affordability checks.

Even on civvy street, addresses can cause issues. New build developments are notoriously difficult for lenders to find because they can have multiple postcodes, with the ‘right’ one often not appearing on many systems for as long as a year after completion. Even for older properties (flats especially), if there are multiple ways the address can be written you might have issues when you approach a lender.

The potential for this to be a problem within the forces has reduced since Royal Mail issued UK postcode-style addresses for BFPOs (which are now recognised by the UK’s Credit Reference Agencies), but there are still gaps, meaning even if your BFPO appears correctly on your Credit Report, lenders might not be able to find all the information they need.

Additionally, if your recent recorded address history shows you’ve been moved from one base to another, this could be seen as a lack of stability to the eyes of a lender that isn’t familiar with how routinely this can happen as part of military life.

The evolution of BFPOs

BFPOs have been around in some shape or form for a couple of hundred years, and today act as a standard UK address for military bases, allowing post to be sent and received regardless of where in the world they are. Its role has evolved from being a simple method of distributing post and can now be used as an actual location which is officially recognised by lenders and similar organisations.

Up until a few years ago, BFPO addresses were not included in the standard Royal Mail address database, meaning that they would not be found/returned in most searches. This made everyday things like online shopping, signing up for government services or applying for finance something of a headache.

This changed when Royal Mail introduced specific ‘BF’ postcodes, with bases and vessels across the world being assigned their own address in a recognisable format. For example BFPO 2, BF1 3AA is located in Washington; BFPO 56, BF1 2AX means you’re based in Madrid and BFPO 358, BF1 4JY will see you aboard HMS Penzance.

If you are looking for an alternative means of accessing all your post while overseas, you could use ScanMyPost to turn your traditional post digital. This works similarly to the INtouch (formerly e-Blueys) system used on most bases, but instead of creating a physical copy of a digital correspondence, ScanMyPost lets you to view your post online via a computer or smartphone.

Using a BFPO to as your main address

We’ve discussed in the past the potential difficulties of using a BFPO to take out credit, highlighting the issues of using one address for many people. Considering the size of some of the bases (Camp Bastion was home to 30,000 service personnel at its peak and roughly the size of Reading), the likelihood of two people sharing the same name at one BFPO is much higher than at a standard address and as such so is the possibility of getting the wrong person’s information on your Credit Report.

Under the old system, Credit Reference Agencies were forbidden by the Information Commissioner from keeping data relating to BFPO addresses.

For that reason, if you are in a position where you can choose between applying for and managing credit accounts at a standard UK address (whether it be your actual home or a family home) or using a BFPO address, you might find that the first option is easier.

For personnel that want to take out credit, either as single applicant or as part of a joint application while still out of the country, making sure there are as few ‘gaps’ as possible in your address history will maximise your chances of getting accepted and so if maintaining a UK address isn’t an option, using a BFPO address is a feasible back-up option.

What happens to my Credit Report while I’m overseas?

Standard Army tours last for six to eight months and Naval tours can last up to nine, but you can be posted abroad for several years at a time.

Most information remains on your Credit Report for six years, so unlike expats that up sticks and move to another country and return to the UK several years later to find there’s no recorded credit history for them, you won’t need to worry about building your credit rating from scratch every time you’re out of the country for a few months.

If however you find yourself spending three years stationed overseas and the last form of credit you took out was paid off several years before you left, you might find there’s not a huge amount of credit history on your report when you return home, so you might struggle to get approved by some lenders.

If you keep a permanent UK address while you’re based abroad and any existing credit agreements remain recorded there (such as a mortgage), then nothing much changes – your Credit History will continue in your physical absence.

Bear in mind that even if you’re living elsewhere, you’re still responsible for ensuring that any payments are made on time each month (with joint accounts too) and so it’s best to ensure that Direct Debits are in place. The last thing you want to be worrying about is whether or not your credit card bill has been paid on time.

If on the other hand you’re not going to have an address in the UK, using the BFPO for your station may be your best option, as they are now recognised by Credit Reference Agencies, but as mentioned above, there is an increased risk of errors occurring and your details not being retrieved by a lender, so you will need to check your Credit Report to make sure everything looks as it should.

We’d never recommend someone take out credit just for the sake of building a credit history, but it even if you maintain a credit card for basic spending, it can help keep your Credit Rating ticking over.

Maintaining details & credit history while you’re away

If you’re using a BFPO as your primary address, it’s essential to make sure that you update this address with your bank and any existing credit agreements whenever you’re stationed somewhere new. Keeping your address up to date wherever you are will help give prospective lenders the best chance of finding your Credit Report, making you less likely to be turned down.

Making sure that any existing credit agreements are paid in full will also help you build a credit history while you are out of the country. Dodgy internet connections or infrequent access to a computer might make paying bills ‘manually’ tricky and could lead to a build-up of late payment markers on your Credit Report – something you really don’t want to happen.

To avoid this, set up a Direct Debit for any credit agreement you hold, and again, check your Report regularly to make sure that everything looks correct and up-to-date.

Overseas Armed Forces stationed in the UK

If you’ve joined the British Army as a citizen of the Commonwealth, as a Nepalese Gurkha or a member of the US Air Force stationed in the UK, it’s your credit rating in your home country that will be used to determine your creditworthiness.

Most countries have a completely different approach to credit scoring, so you might find that entirely different advice applies to each, and you will need to check for information issued within your home country before proceeding to try and take out credit in the UK.

If you do find yourself stationed in the UK for an extended period, you might find yourself needing to take out credit at some point, and there are a number of credit unions and finance options available for those in your position.

Specialist Armed Forces Lenders

Much like specialist mortgage lenders, who offer bespoke mortgage products to a list of specified vocations, certain lenders offer dedicated services specifically for service personnel, which could improve your chances of getting accepted for credit. In most cases specialist lenders are likely to be more aware of your circumstances and potential hurdles and could be more likely to understand how your credit history might be affected by a career in the military.

Even if a lender specifically invites applications from military personnel, whether or not you will be accepted will largely depend on the information on your Credit Report. If you have a history of arrears, are financially linked to someone with a worse Credit Rating than yourself or you’ve got no history of making repayments in the past, you may still struggle to get accepted. That’s why it’s recommended to check your report before you apply so you can see what lenders will see.

Some high street banks offer services to both active and retired members of the armed forces, and there are also lenders set up specifically to cater to those in the military. Some offer dedicated branches in or near bases to make it easier to apply in person, but all should in theory be able to cope with the fact that you might have limited credit history at most of your known addresses.

It’s always worth comparing the deals offered by specialist lenders against the ones available from more mainstream lenders to make sure you don’t end up paying more interest than you need to.

An Armed Forces Help to Buy scheme is also available for those applying for a mortgage, which has helped put more than 15,000 servicepeople into housing since 2014 according to the Ministry of Defence. The scheme has since been extended and is set to finish at the end of 2019.

Military car finance

Specialist car finance websites are also available, along with military finance offers available from some manufacturers themselves such as Volvo and Ford, which will help you find a participating dealership near where you’re based. Much like specialist mortgage lenders, military car finance providers may be more used to customers moving from one location to another on a regular basis, but the information on your Credit Report is ultimately what will inform their decision.

As with any other form of finance you take out, it’s always worth shopping around to make sure you get the best rate, and with cars there’s plenty of potential to save.

Getting the best chance of getting accepted for credit

The same principles apply when you are looking for finance, whether you’re based in the UK or serving abroad, including being able to complete applications completely online.

The Electoral Roll is a key component of your Credit Rating and even if you’re based overseas, you can still register to vote via the Government’s Armed Forces Register to Vote page. For many lenders this is an essential piece of information and could make a big difference to your chances of being accepted, especially if you move from base to base regularly.

In all circumstances, knowing what your Credit Report says about you before you apply is key.

To see the UK’s most detailed Credit Report, with more detail than you’ll see anywhere else, you can try checkmyfile free for 30 days, then for just £14.99 a month which you can cancel online at any time or by phone or secure message.

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