How Does Debt Affect Military Security Clearances (2024)

For those pursuing a life in the United States military — Army, Navy (including the Marine Corps), Air Force, Coast Guard or Space Force — gaining and keeping a security clearance can be vital to acquiring increased responsibility, advancing in rank, earning higher pay, and, indeed, staying in uniform, period.

What’s the most common reason applicants for a security clearance are denied? Botched finances, the same one that causes those with clearances to lose them.

The reason is self-evident: Military personnel in deep debt are considered more open to bribes or accepting money in exchange for revealing secrets.

Why Does Credit and Debt Affect Security Clearances?

Operatives trading in government secrets look for levers that can spring locks to classified information. Chief among those levers: bad credit and/or high debt. Individuals whose financial lives are compromised are more susceptible to criminal temptation.

Personal finance concerns apply across the government spectrum, reaching even the highest appointed offices. In July 2023, the White House scuttled its nomination of Kemba Walden as the permanent national cyber director, citing the high debt load she and her husband carry — even though Walden’s work as the acting director had been praised across Capitol Hill.

Similarly, says BizReport editor Young Pham, “The link between personal finances and military security clearances is undeniable, as financial stability is considered a critical component of an individual’s overall trustworthiness and reliability for holding a security clearance.”

Is Bad Credit a Disqualifier for Military Security Clearances?

Since 2018, under the Defense Counterintelligence and Security Agency, all federal personnel with security clearances have been subject to continuous vetting under Trusted Workforce 2.0, supported by the National Background Investigation Services, a “secure IT system that … coordinate[s] and connect[s] the systems, interfaces and databases that support continuous vetting.”

Credit and financial activity are among the seven categories identified for perpetual surveillance, alongside criminal activity, foreign travel, and terrorism.

National Security Adjudicative Guidelines make clear the link between security clearances and well-managed finances:

“Failure to live within one’s means, satisfy debts, and meet financial obligations may indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which can raise questions about an individual’s reliability, trustworthiness and ability to protect classified or sensitive information,” the guidelines say.

“Accumulating excessive debt or having a history of financial mismanagement can raise concerns about an individual’s judgment, self-control, and reliability,” Pham says. “Financial problems may affect an individual’s ability to maintain the security of classified information, as it could lead to risky behavior or security breaches.”

Still, it’s financial irresponsibility — that is, an unwillingness to address debt trouble — that’s a more serious concern. Context matters. Are your problems largely out of your control (divorce, job loss, health emergency, or business failure)? You may be in luck.

If, instead, your financial woes are an extension of personal foibles, such as gambling or alcohol addiction, or illegal activity, you can kiss that security clearance goodbye.

There’s more. If your money trouble occurred through bad breaks or honest mistakes, investigators will examine what you’re doing (or not doing) to right your financial ship. Are you working to pay down your debts? Have you created a budget and added to your income streams? Have you connected with a nonprofit debt counseling service? Such efforts will accrue to your favor.

It’s also a good idea for anyone with a security clearance, or wanting one, to keep regular track of their credit reports, and be alert to errors or fraudulent activity. Be ready to defend yourself against bad information or nefarious actors.

How Much Debt Is too Much for a Military Security Clearance?

While it is generally conceded that excessive debt is a cause for denying security clearances, no military branch has a set amount that will result in being denied.

In fact, the term used for potentially disqualifying a candidate for a security clearance is “excessive indebtedness,” which is open for wide interpretation based on a soldier’s income and assets.

A better gauge might be the individual’s debt-to-income ratio, measured by dividing total monthly debt by monthly income. For example, if you owe $2,000 a month and have income of $4,000, your DTI would be 50% (2,000 ÷ 4000 = .50).

That is considered an excessive amount of debt, but not a disqualifying amount unless the debt has been delinquent for some time.

Does Bankruptcy Impact Military Security Clearance?

As with bad credit and problematic debt, the answer about bankruptcy’s impact on security clearances is an absolutely crystalline “maybe.”

A history of financial irresponsibility will be tightly scrutinized in the evaluation process. Accordingly, whether bankruptcy would affect your clearance prospects depends largely on the circ*mstances that prompted you to file.

If you’re filing bankruptcy to discharge debts that mounted for reasons beyond your control — you or a family member lost a job; a medical emergency cut into the household income; a business deal full of promise went bad — investigators may recommend leniency: You chose a legal, responsible method to deal with a financial crisis.

However, your security clearance will be jeopardized if your bankruptcy is tightly linked to ill-advised behavior: reckless gambling, drug habits, or wanton overspending.

How Do Taxes Impact Security Clearances?

Whether you owe taxes or simply have failed to file an income tax return (even if you’re due a refund), IRS problems can cost you your security clearance.

Again, it becomes a matter of trust. A security clearance is a precious jewel granted by the federal government, requiring daily care — no sloppy missteps. If you cannot be counted on to comply in a timely matter with every citizen’s obligation to file on time, what’s to say you won’t abuse security rules and obligations that demand similar diligence?

This does not mean you’re in trouble if you typically request an automatic extension to file, or if you file late routinely. Habitual scofflaws will have problems with the government, but occasional, minor missed deadlines — especially backed up by plausible reasons — may get a pass.

The Security Clearance Process

A security clearance is required for any job that involves knowing, protecting, and appropriately sharing secret government information. Getting and keeping that clearance is a complicated, painstaking process, involving a polygraph (lie-detector) test, a special background investigation, and criminal and financial background inspections.

“Policymakers consider it crucial to uphold national security by ensuring that individuals entrusted with classified information have sound financial backgrounds,” Pham says. “Consequently, a limited or denied security clearance can indeed have significant implications for one’s military career.”

As a result, the process is designed to be arduous. To begin, you have to be sponsored by an approved source. Individuals cannot simply volunteer themselves for security clearances.

Once that hurdle is cleared, your next challenge is Security Clearance Form 86.

What Is Security Clearance Form 86?

The Standard Form 86, Questionnaire for National Security Positions, is used by military personnel, government contractors, and government employees to apply for some level of security clearance: confidential, secret, top secret.

SF-86 is, by design, a 15-round cage match with a grizzly bear. Harrowing, lengthy and relentless, the form demands utter honesty and completeness. Applicants cannot fudge, finesse, cheat, lie, or even lie by omission and expect to earn that coveted, career-enhancing clearance.

Most of SF-86 deals with common questions about your background and experience, but there are seven pages dealing with financial history.

SF-86 includes a Catch-22: The information you provide is voluntary; however, withholding requested information will adversely affect eligibility for a national security position and eligibility for access to classified information.

Therefore, leave no gaps. Err on the side of elaboration. When in doubt, provide an explanation.

Common Mistakes to Avoid on the Form 86:

  • Failure to properly enter your full name.
  • Entering your date of birth incorrectly.
  • Inaccurately reporting your place of birth.
  • Having an active foreign passport.
  • Lying about or omitting information about illegal drug activity.
  • Failing to report noncriminal court actions (and the outcome).
  • Failing to properly address financial trouble.

Your application is a test of honesty and integrity. If you’re willing to omit or mischaracterize events in your past on a form, an investigator may conclude you cannot be trusted with vital government information.

Guideline F: Financial Factors That Cause Concern

The Department of Defense examines a full range of characteristics before it is satisfied that someone is security-clearance worthy. Categories examined include allegiance to the United States, foreign influence, drug and alcohol use, personal conduct, sexual behavior, even mental and emotional stability.

While many of these qualities are difficult to pinpoint with scientific accuracy, how a candidate for security clearance manages money is readily apparent, which helps explain why financial mismanagement is the most common area of disqualification.

Some of the financial factors (from U.S. Code of Regulations, Title 32 — National Defense, Part 147.8 [Financial Considerations]) that hoist red flags:

(a) The concern. An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds. Unexplained affluence is often linked to proceeds from financially profitable criminal acts.

(b) Conditions that could raise a security concern and may be disqualifying include:

  1. A history of not meeting financial obligations.
  2. Deceptive or illegal financial practices such as embezzlement, employee theft, check fraud, income tax evasion, expense account fraud, filing deceptive loan statements, and other intentional financial breaches of trust.
  3. Inability or unwillingness to satisfy debts.
  4. Unexplained affluence.
  5. Financial problems that are linked to gambling, drug abuse, alcoholism, or other issues of security concern.

While the Pentagon correctly worries about irregular or haphazard financial histories, its investigators also are charged with uncovering mitigating circ*mstances (if any).

Was the financial trouble isolated and/or well in the past? Were the problems outside the applicant’s control: job loss, medical emergency, divorce, death, some other major life event? Has the candidate received effective counseling, signaling the problem is resolved or under control?

Is the candidate’s affluence from a legal source: inheritance, an award in a civil lawsuit, even lottery winnings?

Prepping for Your Security Clearance Interview

Once you have submitted SF-86, next up is a security-clearance interview. If your answers on SF-86 are accurate, complete, and free of red flags, congratulations: The personal interview should not be a problem.

William Henderson spent 35 years in the security and counterintelligence business before founding the Federal Clearance Assistance Service to advise people about preparing for a security clearance interview. For your interview, he says, have a copy of your completed SF-86 at hand. Most questions are follow-ups to the answers you’ve written on that form.

Bring documentation, especially for any ticklish situations involving credit cards or bank loans. You may have to elaborate on the circ*mstances surrounding some of your answers, particularly regarding choices such as defaulting on student loans, or an auto loan, or consistent late payments for rent or utilities. Investigators will want to know why you made the decisions you made, any pressure or coercion involved, whether your behavior has changed, and the likelihood of it occurring again.

You may be asked to sign a release for information on financial matters. Though the whole process is voluntary, refusing to sign could result in denial of security clearance.

In short, be ready to explain your history at length and at a granular level. You’re asking the government to entrust you with the safety of the nation. The least you can do is be persuasive that your life is in order.

Can You Get Discharged for Failing to Pay Debts?

It’s not just your security clearance that can be throttled by excessive debt and the trouble it triggers. Entire military careers have been derailed by financial strife.

Besides security clearances, the other key issue tied to unruly debt involves military readiness — that is, the ability to perform your duty without restrictions or distractions, including the ability deploy.

Military personnel compromised because of debt worries cannot be counted on to carry out mission-critical duties. Failure to perform can lead to a variety of punishments, including bad-conduct discharge.

Practical Solutions for Keeping Debt Under Control

Financial management is available on most, if not all, military installations, butmilitary members also can seek debt managementor financial advice on their own.

Routinely checkingyour credit scoreis a key factor for making certain debt doesn’t affect your security clearance.

Some other practical suggestions for when debt is a problem include the following:

  • Seeking credit counseling from a nonprofit agency, especially if the company can negotiate lower interest rates and better payment terms on your debt.
  • Researching methods and options for military and veteran debt consolidation.
  • Documenting all efforts to manage the problem, including names, dates and whatever other particulars were involved.
  • Preparing a budget that is a realistic review of your finances and consistently reduces your debt.
  • Making at least minimum payments to your creditors every month.
  • Immediately disputing amistake on credit report.
  • Notifying security officers or your immediate commander that you’re having financial problems and are seeking assistance to deal with them.
How Does Debt Affect Military Security Clearances (2024)

FAQs

How Does Debt Affect Military Security Clearances? ›

While there is no cutoff for a credit score in terms of financial eligibility, a low score or history of excessive debt or delinquent payments could flag your application. Once you're in the military, you'll have to continue to show that you can manage your finances. In short, you'll be expected to pay your bills.

Does the military look at your debt? ›

While there is no cutoff for a credit score in terms of financial eligibility, a low score or history of excessive debt or delinquent payments could flag your application. Once you're in the military, you'll have to continue to show that you can manage your finances. In short, you'll be expected to pay your bills.

What disqualifies you from military security clearance? ›

You are not a U.S. citizen. You were dishonorably discharged from the military. You are currently involved in illegal drug use. You have been judged as mentally incompetent or mentally incapacitated by a mental health professional.

Will paid collections hurt my security clearance status? ›

No, a debt collector cannot revoke your security clearance. However, failing to pay debts on time can result in negative information on your credit reports and may cause your security clearance to be pulled when it's up for review.

Can I get a security clearance if I owe taxes? ›

Applicants do not need any additional hurdles interfering with receiving their successful approval. Yet, the existence of an outstanding tax debt is a frequent basis for security clearance denial. If an applicant has a tax lien, follow these steps to increase your likelihood of a favorable outcome.

Can I get a security clearance with debt? ›

In fact, the term used for potentially disqualifying a candidate for a security clearance is “excessive indebtedness,” which is open for wide interpretation based on a soldier's income and assets. A better gauge might be the individual's debt-to-income ratio, measured by dividing total monthly debt by monthly income.

How much is too much debt for a security clearance? ›

No branch of the military has a set amount of debt that is the breaking point for security clearance. You could owe $5,000 or $50,000 and be granted or denied clearance. It's all a matter of how you deal with the debt. Responsible behavior in tackling your debt problems is considered a positive.

What is a red flag for a security clearance? ›

Regular or recent use of illegal substances, especially if it involves drugs categorised as controlled substances, is a red flag for security clearances. Drug use, even if it is in the past, can raise concerns about an individual's judgement, reliability, and susceptibility to coercion.

What will fail a security clearance? ›

During the background check process, certain factors may lead to a person's clearance being denied—such as having a criminal record, financial issues such as bankruptcy or delinquent debts, having affiliations with groups or organizations connected with espionage, and/or drug use or addiction.

How often do security clearances get denied? ›

Security Clearance Denial Appeals

Approximately 1% of applicants are denied a security clearance.

Is there a debt limit for security clearance? ›

As with credit scores, there is no set amount of debt that can disqualify you from being granted a security clearance. None of the major branches of the military looks only at how much you owe in making a decision on your candidacy. The reviewer of your case tries to put that amount in context.

Does debt show up on background check? ›

Though prospective employers don't see your credit score in a credit check, they do see your open lines of credit (such as mortgages), outstanding balances, auto or student loans, foreclosures, late or missed payments, any bankruptcies and collection accounts.

Does a bad credit score affect security clearance? ›

If you want to pursue a military career, your most significant obstacle may be your credit history: in many cases, financial issues are the leading cause of security clearance denials for most candidates and can make it very hard to get a military security clearance with bad credit.

Does IRS debt show on background check? ›

The IRS does not report your tax debt directly to consumer credit bureaus now or in the past. In fact, laws protect your tax return information from disclosure by the IRS to third parties (see the Taxpayer Bill of Rights). However, once a Notice of Federal Tax Lien has been filed, your debt becomes public record.

What excludes you from a security clearance? ›

According to the Bond Amendment which became law in 2008, there are technically four disqualifying criteria: criminal conviction resulting in a prison sentence over 1 year; dishonorable discharge from the military, criminal incompetence; or addiction to a controlled substance.

Does security clearance check bank accounts? ›

A Top Secret security clearance doesn't require one to turn over this level of documentation - they just pull credit reports, which show active and closed lines of credits, balances, etc. Depends on where you are working with that clearance. Some agencies require an annual report of all bank and credit card statements.

Does the military take care of debt? ›

A benefit of being in the military are the programs in place specifically designed to limit debt risks to service members and to help them dig their way out of debt. These programs are not a punishment or burden. They can be a help to a veteran drowning in debt and are, in fact, a benefit of serving your country.

Can I join the military if I have debt? ›

You Must Be Financially Responsible to Join the Military

The following are some of the most common financial circ*mstances that can affect your ability to join the military: large amounts of credit card debt. foreclosures and repossessions. delinquent accounts, and.

Can the military check your bank statements? ›

Soldiers can not be forced to provide personal financial information to the command, even if they are facing financial difficulty.

Does the military wipe your debt? ›

The US military offers programs to help service members repay their student loans. While the military doesn't erase all debts, their financial assistance means a lot to families who aren't well off. Moreover, the US military provides plenty of opportunities to young people who want to pursue their dreams.

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