How Being in Debt Affects Military Clearances

How does debt effect security clearance for our military personnel

Members of the military risk losing security clearance, not being promoted and possibly even seeing their career end over struggles with debt. The Department of Defense (DoD) encourages service members to find responsible solutions to their financial problems without compromising national security, but the threat of debt-related problems is always present.

The issue of security clearances and debt is a sensitive one for the U.S. military because a solider in debt is considered more open to bribes or accepting money in exchange for revealing secrets. There are about 4.5 million people with secret and top clearance. The Department of Defense claims that it “… does not maintain comprehensive data for clearances held by all DoD personnel,” and thus could not say how many of those 4.5 million people are in the military and how many are civilian contractors.

The DoD also said it “does not maintain specific information,” on how many people are denied security clearance because of debt problems, but other sources say that debt is the primary reason for 50% of the security clearance denials.

The Defense Department has a set of rules called the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information, that outlines the factors that influence security clearances and access to classified information. Financial considerations are one of the 13 factors in the Adjudicative Guidelines. Other areas include personal conduct, alcohol consumption and criminal conduct, among others.

A DoD spokesman, Lt. Colonel Damien Pickart, says the guidelines are not ranked in order of importance, relevance or any other potentially disqualifying information. But military personnel in debt can lose their security clearances if they don’t effectively manage their debt.

There is a paragraph within the Adjudicative Guidelines, called Guideline F, which talks specifically about the impact finances have on security clearance. It reads: “Failure to live within one’s means, satisfy debts, and meet financial obligations may raise questions about the individual’s honesty and put people, property or information systems at risk.”

John Pickens III, executive director of VeteransPlus said that his organization counseled 38,635 service members in 2015 and 55% of them expressed concern with the impact high debt loads would have on their security clearance. According to Pickens, the average unsecured debt (mostly credit cards) for his clients was $13,700 and the average debt-to-income ratio was 46.5%. Financial experts say that less than 37% debt-to-income ratio is healthy and anything over 43% is a sign that financial distress is inevitable, if not imminent. 

Factors That Cause Concern

The military is always on the watch for service members who are financially overextended and thus at risk of engaging in illegal acts for money. This could apply to any solider, but the primary candidates are young, enlisted members who have limited experience handling money.

According to, two-thirds of the members of the military are under the age of 30 and that, more than anything, accounts for financial problems. Young people in general are inexperienced with financial services and products. Managing budgets properly and paying bills on time are problems that often are ignored until a financial crisis hits home.

A 2013 survey by the Defense Manpower Data Center (DMDC) found that 39% of active duty military members were short on cash between paychecks. Other key findings from their survey were that 16% of service members couldn’t use their credit cards because they were maxed out; 10% said they were unable to pay monthly bills and 8% were more than 60 days late on mortgage or other debts.

The cause of the debts and actions taken — or not taken — to pay debts, as well as habits and trends, tell far more about a person’s judgment and reliability than their amount of debt.

There are indicators that raise security concerns and could disqualify a person from obtaining or maintaining their clearances:
  • History of not meeting financial obligations
  • Check fraud, embezzlement, income tax evasion, filing deceptive loan statements and other financial breaches of trust
  • Changing addresses without notifying creditors
  • An unwillingness or inability to pay off debts
  • Financial problems related to gambling, alcoholism, drug abuse or other security concerns
  • Unexplained affluence

With approximately 1.5 million people in all branches of the military at the end of 2015 — and an estimated 854,000 of them holding top secret security clearances — that means a lot of people are at risk of being compromised because they’re so far in debt.

Bad Credit, Bankruptcy and Security Clearances

Debt problems happen in the military for the same reason they do in civilian life: credit card spending, upside down loan situations, overspending on automobiles, excessive student loan debt and unstable employment conditions for spouses.

Each of those could contribute to a person having bad credit, but the military says that does not automatically disqualify someone from receiving security clearance. How the individual accumulated debt and how they deal with it are key factors in final approval or denial of security clearance.

If the debt was the result of unforeseen circumstances such as divorce, medical bill debt or a sudden downturn in the housing market, the review process will take that into consideration. If the person accepts credit counseling, enters a debt management program, debt consolidation or takes other steps to eliminate the debt, they could still receive a security clearance.

However, if the debt occurred because of reckless spending, gambling, careless investing or drug or alcohol dependency, it could be very difficult to receive a security clearance.

Even filing for bankruptcy does not mean you can’t receive a security clearance. A person receiving credit counseling may be advised that bankruptcy is the best option for eliminating debt. Thus, choosing to declare bankruptcy could be considered a painful, but prudent decision.

If the financial standing of a person with any type of security clearance comes into question, the government provides a process to determine whether it will revoke or maintain that clearance.

The adjudicative process weighs many factors to form a complete picture of the situation, including reliable information about the person, whether it’s past, present, favorable or unfavorable. Officials also judge the seriousness of the questionable conduct, circumstances, frequency of problems, age and level of maturity, openness to participate in the investigation, absence or presence of rehabilitation and other factors.

Each possible violation of a security clearance guideline is judged on its own merits. Officials say that any doubt will be resolved in favor of national security.

There are some conditions that could relieve the government’s concern over a person’s financial standing:
  • Behavior was not recent or it was an isolated incident
  • It was largely beyond the person’s control because of veteran unemployment, loss of business, divorce, separation, death or unexpected medical emergency
  • The person received credit counseling or services like debt management toward resolving the problem and bringing it under control
  • Sudden affluence is a result of some legal consequence
  • Person started a good-faith effort to repay or resolve debt

What Is Security Clearance Form 86?

Security Clearance Form 86 is a 127-page document that is given to anyone — including military members, contractors and consultants — who needs to receive or retain national security clearance.

Filling out Security Clearance Form 86 is the first step toward receiving one of the three levels of security clearances granted by the U.S. government: top secret (highest), secret and confidential.

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

The questions are predictable and honesty is required. The list includes things like:
  • Have you filed for bankruptcy?
  • Do you have financial problems resulting from improper use of a credit card or gambling?
  • Are you delinquent on alimony, child support or unpaid taxes?
  • Have you defaulted on loans, had a car repossessed or a home foreclosed on?
  • Have you sought credit counseling?

Form 86 is used to do background investigations; providing any information is voluntary. However, if you do not provide requested information, the form states that it will adversely affect your eligibility for a national security position and eligibility for access to classified information.

Obviously, lying or providing misleading information, is another no-no. Federal agencies generally fire or disqualify individuals who falsify information on this form.

Preparing for Security Clearance Interview

Once you have completed Form 86, the next step is to go through a security clearance interview. If your answers on Security Clearance Form 86 are accurate and raised no red flags, 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 on how best to prepare for a security clearance interview. Henderson advises clients to have a copy of their completed Security Clearance Form 86 with them when they go for a personal interview. Most of the questions are follow-ups to the answers you’ve already written on that form.

It makes sense to bring any documentation you have, especially for any uncomfortable situations you’ve had with things like credit cards or bank loans. You may have to explain in more detail the circumstances surrounding some of your answers, particularly if it regards choices like defaulting on student loans or 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 on that subject, and the likelihood of it occurring again.

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

Practical Solutions for Keeping Debt Under Control

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

Checking your credit score is one of many suggestions for dealing with debt so it won’t affect your ability to get a security clearance.

Some other practical suggestions for when debt is a problem include the following:
  • Seeking credit counseling from a non-profit agency, especially if the company can negotiate lower interest rates and better payment terms
  • 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 a mistake on credit report
  • Notifying security officers or your immediate commander that you’re having financial problems and are seeking assistance to deal with them
Bill Fay

Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at

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