Servicemembers Civil Relief Act (SCRA) & Your Credit Rights

The Servicemembers Civil Relief Act (50 U.S.C. §§ 3901-4043) is a federal law that protects active duty military from financial hardship during deployment. Understanding your SCRA rights can prevent creditors from damaging your credit during service.

The 6% Interest Rate Cap

Active duty servicemembers can limit interest on pre-service debts to 6% per year. Send written notice with a copy of your orders to each creditor. The reduction is retroactive to the first day of active duty. Creditors must reduce the rate and credit the difference. Lenders who refuse valid SCRA requests may be in violation of federal law.

Foreclosure Protection

During active duty and for one year after, courts must hold a hearing and a judge must find that military service did not materially affect the servicemember's ability to pay before allowing a foreclosure on a pre-service mortgage. This gives servicemembers a judicial backstop that civilian borrowers do not have.

Lease Termination Rights

SCRA allows servicemembers to terminate residential and automobile leases early without early termination penalties when receiving deployment orders or a permanent change of station. Written notice plus orders is all that is required.

Protection from Default Judgments

Courts cannot enter a default judgment against an active duty servicemember without first appointing an attorney to represent them and conducting a hearing. This prevents creditors from obtaining judgments while the servicemember is unavailable to defend themselves during deployment.

SCRA and Credit Reporting

When a creditor fails to apply the 6% interest rate cap, excess interest can cause accounts to go delinquent and be reported as late payments or charged off. These items may be disputable under FCRA Section 1681i as inaccurately reported because the delinquency was caused by the creditor's SCRA violation rather than the servicemember's failure to pay. Credlocity can identify these items and dispute them.

Learn about credit repair for military and veterans →

Start your free 30-day credit repair trial →

Credlocity Business Group LLC — 1500 Chestnut Street, Suite 2, Philadelphia, PA 19102