How Military Allotments Affect Your Credit

Military allotments can significantly influence a service member's credit report or profile. When utilized effectively, allotments act as a financial stabilizer, ensuring that debts and obligations are addressed in a timely manner.

Discretionary Allotments

A discretionary allotment is voluntary and set up by a service member. These allotments can be stopped, started or adjusted by the service member at any time. It’s important to understand that you cannot have more than six discretionary allotments per month.

Common discretionary allotments include:

• Healthcare premiums
• Life insurance
• Mortgage or rent payments
• Deposits to financial institutions, mutual funds or investment firms

Many who are deployed in war zones use discretionary allotments to deposit money into the Department of Defense Savings Deposit Program.

Non-Discretionary Allotments

Non-discretionary allotments may be involuntary or voluntary but cannot be stopped or started at any time. There is no limit on the number of non-discretionary allotments, but they are limited to certain scenarios.

These include:

• Purchasing U.S. savings bonds
• Relief loan repayments
• Charity
• Child and spousal support
• Assistance funds
• Delinquent tax payments (federal, state, or local)
• Delinquent travel charge card debt

Military Allotment Restrictions

Military allotments do have some restrictions that service members should be aware of.

• Minors: Allotments cannot be made payable to children under 16 (except for bonds).
• Mentally incompetent persons: Guardians or institutions should receive allotments for those mentally incompetent.
• Power of Attorney: A general power of attorney cannot make changes to allotments. Only a designated special power of attorney can.
• Member awaiting court-martial: Allotments cannot be registered between ordering a court-martial and the decision on the sentence. Standing allotments might be stopped based on the court's decision.
• Prisoners: Allotments can be registered if they have sufficient non-forfeited pay.
• Returned absentee and deserter: Allotments are not registered unless DFAS confirms the member’s pay status.
• Fraudulent enlistment: Allotments are halted if there's suspicion of fraudulent enlistment.
• Reduced pay of allotter: If a service member's pay is reduced and there aren’t enough funds, allotments are stopped.
• Personal property: Discretionary allotments are not allowed for items like vehicles, appliances, electronics, and other tangible movable goods.

If you have any questions about allotment restrictions, visit your local pay office or officially refer your question to DFAS.

When Allotments Are Risky

Allotments are risky when payment amounts fluctuate. Too many people get hit with late payments when they set up allotments for something like a credit card. One large purchase can increase your minimum payment, and even though the payment may only go up by 10 dollars, paying too little is considered late and can affect your credit score.

Without your notice, you can get stuck with late notices. Even though you are making payments, the payments aren’t sufficient and end up categorized as late or missed. A number of these in a row can really hurt your credit score.

When Allotments Are Smart

Allotments are a great option for recurring expenses that will always be the same amount. Some examples include healthcare premiums, retirement contributions or mortgage payments. You can be sure that these expenses will remain constant, and it's always an option to increase the amount or make a one-time additional payment.

Setting up automatic payments through individual companies for expenses like utilities and phone bills may be beneficial. That way, the correct amount will be taken out every month, no matter what.

When setting up an allotment through myPay, there is a “no later than” date listed before and after you set up the allotment, letting you know whether the allotment will start this month or next month. Allotments are deducted from multiple pay periods, so half comes out with your first month’s Leave and Earnings Statement (LES) and the other half is paid for your second military paycheck that month.

Watch your LES carefully until you see that an allotment has been successfully started. Do not assume that any bill is being paid by a new allotment until you have verified that the payment is received.