How Does Credit Affect Your Security Clearance?

Updated: October 13, 2022
In this Article

    How does your credit affect your ability to get a security clearance? Does it play a role at all? Anyone who has experienced a background check before knows the answer is definitely YES.

    Your credit does play a part in how your background check is interpreted by the reviewer. That may sound like a fairly black-and-white proposition, but in reality much depends on circumstances and context.

    Background checks can include nuanced information that requires further development or investigation; you may be asked follow-up questions based on the details of your investigation or you may need to submit supporting documentation if asked to do so.

    Security Clearances And Background Checks: Why They Are Needed

    There is much ambiguity surrounding the background check process, at least to those who are on the outside of that process. It sounds quite mysterious and a bit daunting, especially when you are told that you need to remember or research ALL your previous addresses over a specified period of time.

    That alone can be challenging depending on the applicant.

    Security clearances are required for government employees who must work around or directly with classified information or systems. The security clearance itself does not guarantee access to sensitive data, but provides the general authorization to work with classified systems or in classified areas.

    There are three levels of clearance; Confidential, Secret, and Top Secret. Not all classified information is classified because they are state secrets but any items that are classified must be handled according to established secure procedures.

    Employees hired for work in federal facilities must be vetted to handle these classified documents, use classified systems, or work in classified areas. Clearances are given only as-needed, which means if your work does not require a Top Secret Clearance, you won’t be granted one.

    Security clearances are not part of a meritocracy; you don’t “earn” a Top Secret clearance after having worked your way up in trust from Confidential or Secret trust levels. The clearance you are given is appropriate for the security level you work in.

    Some career progressions may require a progressive increase or decrease in clearances–your job description and your chain of command will be key in determining what level of clearance you will apply for.



    The Background Check Process

    When you submit to a background investigation as part of your security clearance process, you will be scrutinized in a variety of areas in your personal life that include:

    • Foreign Influence
    • Sexual Behavior
    • Personal Conduct
    • Financial Considerations
    • Alcohol Consumption
    • Drug Involvement
    • Psychological Conditions
    • Criminal Conduct
    • Outside Activities

    The background check is designed in part to tell the screeners whether an applicant has a personal vulnerability that can be exploited by a foreign power. For example, someone who is deeply in debt could be bribed or financially influenced to compromise their security clearance by releasing classified information to unauthorized third parties.

    The sexual behavior portion is also an area where screeners have typically been concerned about; concerns that leverage in this area could be applied (in a similar fashion to the financial liability mentioned above) to coerce someone with classified access to distribute classified information to a third party.

    Going down the list, it’s easy to see where the concerns may be raised; someone with prior drug involvement may be viewed as a potential liability if their behavior fits certain patterns, ditto for criminal conduct and other issues.

    And then there’s the section titled “Financial Considerations.”

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    Your Credit And Your Clearance

    At one time, the federal government had the option to run a credit check on all who were up for security clearances. But times have changed, and a policy of continuous credit monitoring was announced under an initiative called Trusted Workforce 2.0.

    That includes a set of overhauls to the security clearance process including, but not limited to:

    • Initial vetting for those applying for new clearances
    • Continuous vetting replaces the previous five-year and ten-year reinvestigations with a model that never stops reviewing those with clearances
    • Clearance Transfer, allowing those with security clearances to a different agency

    This continuous monitoring does include credit reports. You may experience credit difficulties in real time, and under the previous system those difficulties would be known only on the five or ten year re-investigation.

    With current financial data being reviewed hypothetically on an ongoing basis, a certain amount of credit difficulty may cause a servicemember or civilian federal employee to be flagged as a certain kind of risk.

    There are many variables, but on a general level this should be a concern for all service members. Did you know that financial issues are one of the leading causes of having a security clearance denied, revoked, or reduced?

    In a single year alone, the Defense Office of Hearing and Appeals Board received more than two thousand appeals over denied clearances. A startling majority of those (over 1400 out of 2000) were due to financial concerns.

    Poor credit use that is, according to the records, habitual is one cause. Tax evasion is another. Here’s a short list of other things that can stop a security clearance in its tracks:

    • Theft
    • Embezzlement
    • A history of unpaid debt
    • A history of paying late
    • Recent acquisitions of cash or assets beyond the applicant’s means
    • Financial trouble related to gambling
    • Financial issues associated with substance abuse

    Credit Problems Don’t Just Affect Your Clearance

    Any financial problem or credit issue big enough to spoil your chances at a security clearance is also large enough to draw the ire from your chain of command. Those who cannot manage their finances or credit problems may be deemed unfit for deployment, which seriously affects a soldier’s ability to re-enlist, get promoted, use certain military benefits, and more.

    For those who have encountered financial trouble, it’s natural to worry about when or if you might be flagged in such a way; what counts is your attempts to repay your debts and make good-faith efforts to pay on time.

    Your chain of command will want documentation that you are doing everything in your power to live up to your financial commitments; keep that in mind if you experience financial trouble. Why?

    Non-judicial punishment under the Uniform Code of Military Justice provides commanders with the ability to punish troops for financial mismanagement without a court-martial or discharge.

    If you are investigated for financial irresponsibility, any supporting evidence in your favor should be entered into the record so that you can appeal a denied clearance or denied re-enlistment. Without such documentation, you likely don’t stand a good chance of winning your case.

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    If You Get Into Financial Trouble

    If you encounter credit problems or other financial difficulty, honesty is the best policy. Discuss your circumstances with your supervisor and ask what can be done to delay or mitigate official action while you are working on repairing your credit.

    Remember that identity theft can look like financial mismanagement; if you have had your identity stolen do NOT delay in telling your chain of command.

    In any case, enrolling in a financial counseling course or financial management class could be the first step toward getting your credit and your military career back on track even if your problems are not your fault. Your chain of command and your background investigator may take this proactive step quite favorably when trying to decide if you are an acceptable risk.

    If you are in debt, setting up a payment plan with each of your creditors where appropriate can help, too. Any good-faith effort to work on your shortcomings may be viewed as a sign of progress.

    What’s more, it may (or may not) be within your chain of command’s purview to delay action on a security clearance issue or disciplinary action if there are indications that you are doing your best to solve your problems. Commander discretion is a powerful tool; don’t underestimate it as an option that could help you.

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    About The AuthorJoe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News

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