What to Know About Military Security Clearances and Credit

By Lacey Langford
Published on: 12/26/2019

I'd been to this Naval Operational Support Center many times. Each quarter I'd arrive to help staff and reservists with their finances. Since I didn't see them every week, I was excited to catch up and talk about their finances. But my excitement was short-lived.

Upon checking in with the commander, I was notified that one particular Sailor was in deep financial trouble and needed my immediate help - she would lose her security clearance as a result of credit problems.

And since her job required a Top Secret clearance, she would also lose her billet – her position – in the Navy Reserve. You see, security clearances and credit in the military are serious business.

The news came as a shock. On my previous visit, the same Servicemember came to me for advice on better money management. At no point did she reveal her credit crisis. We made a plan for her debt, but she neglected to mention the massive amount she had in collections, and that she was also behind on her mortgage payments.

Had I known, I could have helped her avert a crisis. But withholding information from me wasn't the problem. More importantly, she withheld the information from the Navy, which is damaging to a security clearance evaluation.

The impact of credit and finances on security clearance

Many military members aren't aware of the impact their credit has on security clearance until they’re in the thick of it. And unfortunately, credit and collections are issues for many serving.

According to the National Foundation for Credit Counseling® (NFCC) 2019 Military Financial Readiness Survey:

"Servicemembers and spouses are more likely than the general U.S. population to be behind on bill payments."

Additionally, approximately 34% of the armed forces aren't paying their bills on time. Even scarier, 1 in every ten military personnel has debt in collections.

The situation with the Sailor I helped didn't have to happen. Education and resources are available to help others avoid the same situation.

Here's what to know about security clearances and credit in the military.

What is a security clearance?

A security clearance is a decision on whether an individual is allowed access to classified information.

__There are three main types of clearances: __

  1. Confidential
  2. Secret
  3. Top Secret

For many joining the military, the Department of Defense requires a clearance to perform your duties, which is essentially a background check. The level of background investigation increases with the level of clearance you're trying to obtain.

These types of checks don't just impact people in military service either. Many federal employees and employees in other jobs that require access to sensitive information also require financial background checks.

So not only is your credit important for a military career, it could also impact your post-military civilian job search too.

How do you get a security clearance?

The process to determine eligibility for an initial military clearance or a reevaluation is called the adjudicative process.

The adjudicative process is an assessment of a person to determine if they're an acceptable security risk. The adjudicative agency looks at the available information on a person, which includes their past and present.

The final determination comes from the gathered data, and is compared with the Adjudicative Guidelines (see below).

After the initial evaluation or reevaluation is complete, if there's any doubt about a person's ability to protect classified information, they take the side of national security. In that case, you'll be denied a clearance.

Why does the military review credit history and debt when reviewing security clearance?

The simple answer is Adjudicative Guideline F. During the adjudicative process, the "whole person" is to be evaluated by 13 guidelines.

The 13 Adjudicative Guidelines include:

  • Guideline A - Allegiance to the United States
  • Guideline B - Foreign Influence
  • Guideline C - Foreign Preference
  • Guideline D - Sexual Behavior
  • Guideline E - Personal Conduct
  • Guideline F - Financial Considerations
  • Guideline G - Alcohol Consumption
  • Guideline H - Drug Involvement
  • Guideline I - Psychological Conditions
  • Guideline J - Criminal Conduct
  • Guideline K - Handling Protected Information
  • Guideline L - Outside Activities
  • Guideline M - Use of Information Technology Systems

Under Guideline F, the concern is that a Servicemember who's unable to live within their means and meet their financial obligations could be unreliable, untrustworthy, and unable to protect classified information.

Financial problems that can put your security clearance in danger

Each security clearance decision is based on many factors about the person and their financial situation. There’s no set amount or type of financial problem that can cause a security clearance to be revoked or denied. It just depends. It's more about your behavior and honesty.

The guidelines do layout some examples of conditions that could be a cause for concern, such as not paying your debts, having a history of not meeting your financial obligations, excessive indebtedness, or failing to file taxes.

The Sailor I mentioned before lost her clearance for a combination of factors. Not only did she have an excessive amount of debt in collections, she also withheld the information on her SF 86 – the application for a security clearance.

Security clearance reevaluations

Obtaining a clearance doesn’t mean you have it for life. If you get one, you’ll be reevaluated at a later date.

The level of clearance determines the time until reevaluation. Confidential is fifteen years, a Secret is every ten years, and a Top-Secret clearance requires a reassessment every five years.

Reevaluations are where many in the military get into trouble. They're forgotten because reevaluations are years later and, therefore, aren't top of mind.

Often, financial issues start to build slowly. This slow-build makes it so people push resolving the issue down the line. By then, it's time to re-up your clearance, and fixing your financial problems may take longer to resolve.

Let's not forget that negative information stays on your credit report for seven years. Some bankruptcies even stay on for ten years.

Getting a security clearance with bad credit

The focus on your credit during the security clearance process isn't your credit score. It is on whether or not you meet your financial obligations and/or are proactive in resolving issues. If you aren't able to meet your financial commitments, your ability to meet other commitments could come into question too.

If you have bad credit or poor credit, it often indicates you're not meeting (or have not met in the past) your financial obligations. It could indicate delinquent debts, a history of not making monthly payments that are due, a high debt-to-income ratio, etc.

But it’s not an exact formula. There are many individualized factors that go into the decision of whether to grant security clearance.

You may be able to obtain a security clearance with bad credit or with a bankruptcy, but it can slow down the adjudicative process. They’ll look more closely at the "whole person" compared to the guidelines, as well as how you’re working to make amends in your finances.

How is a security clearance denied or revoked?

Paperwork, that’s how.

When someone comes to me for help with a security clearance issue, the first thing I ask to see is their Letter of Intent (LOI) and the Statement of Reasons (SOR).

These two documents go hand-in-hand and explain the problem exactly.

Letter of Intent

The LOI is the warning letter you receive from your security manager. It’s a way to notify the Servicemember that something found in the adjudicative process needs to be addressed to receive or keep their clearance.

The letter sites the Adjudicative Guidelines as backing for why they need to be addressed.

Statement of Reason

The SOR includes details on what was found during the process. It’s a lettered or numbered list of financial issues the adjudicative authority wants to be resolved before they will approve a security clearance.

Each item will reference the record or report where the information was found. Most of the time, it’s your credit report.

What to do when you receive a Letter of Intent

The good news is, the military gives you a chance to appeal their decision, but time is of the essence.

Depending on the branch, once you receive the LOI, you have 10-15 days to respond to the letter. Attached to the LOI are instructions on how to respond.

It's best to use the SOR as a guide to respond. You must "mitigate" or lessen the concern for each item listed in the SOR. Not only will you need to explain the issue, but you also need to provide proof or documentation for each financial problem.

For example, if your SOR states you have an American Express account in collections for the amount of $4,250, you must state a reason and the action you have taken to correct the issue.

For example, it could be a credit report error, or a case of identity theft, so you attach the letter sent to the credit bureaus requesting it to be removed from your report. Or attach a copy of the identity theft report and proof that you place a fraud alert on your credit.

Mitigating factors for security problems

The Adjudicative Guidelines outline mitigating factors that can help alleviate security concerns. These include:

(a) Behavior happened so long ago, was so infrequent, or occurred under such circumstances that it is unlikely to recur and does not cast doubt on the individual's current reliability, trustworthiness, or good judgment occurred long ago, infrequently, or under unusual circumstances.

(b)The conditions that resulted in the financial problem were largely beyond the person's control (e.g. loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation), and the individual acted responsibly under the circumstances.

(c) Received or is receiving counseling for the problem and there are clear indications that the problem is being resolved or is under control.

(d) Initiated a good-faith effort to repay overdue creditors or otherwise resolve debts.

(e) Reasonable basis to dispute the legitimacy of the past-due debt which is the cause of the problem and provides documented proof to substantiate the basis of the dispute or provides evidence of actions to resolve the issue.

(f) Affluence resulted from a legal source of income.

(g) The individual has made arrangements with the appropriate tax authority to file or pay the amount owed and is in compliance with those arrangements.

Resources that can help

If you’re in the military, and are concerned about your financial situation, or have an upcoming security check, the good news is, there are places you can turn to for help. Here are just a few.

Financial Counselors

The best resource is to get individualized help from a financial counselor on your military installation. They can help resolve financial problems impacting a security clearance. They’re able to help with budgeting, debt, and collections.

Talking to a counselor is free and confidential for Servicemembers and their families.

Free Annual Credit Report

Get a free copy of your credit report each year to review and check for errors or missing information. Your credit report is what the DoD looks at to review your current financial state.

Reviewing it every six months to a year helps you catch financial problems early and resolve them before you have a security clearance evaluation.


Powerpay is a free tool provided by the Utah State University Extension to help you create your own debt management and elimination plan.


If one obstacle towards paying down your debt includes high expenses, then finding ways to save money in other areas of your life could be helpful.

SpringFour is a free, online tool that connects you with financial resources in your local area that could help you with things like utility or food savings, student loan counseling, rental resources and more.

Security clearance bottom line

When you’re required to obtain and maintain a security clearance, it comes down to your financial behavior. Are you demonstrating good or bad financial behavior?

You may have financial problems such as debt in collections but, if you’re actively and consistently making payments and working to resolve the issues, that’s what matters.

Be proactive, and get help if you’re having financial problems.

About the author

Lacey Langford, AFC® is The Military Money Expert® and the founder of LaceyLangford.com, a personal finance blog specializing in the unique world of the U.S. military. Lacey's the creator and host of The Military Money Show, a podcast dedicated to helping the military community with personal finance. She's an Accredited Financial Counselor® with over 15 years of experience in financial planning, counseling, and coaching. Her education includes an Executive Certificate in Financial Planning from Duke University and a B.S. in Finance from the University of North Carolina at Wilmington. As a U.S. Air Force Veteran, military spouse, financial coach, speaker, and writer, she changes people's lives from being fearful of money to having control and confidence with it.

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Written on December 26, 2019
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