Military and debt don’t mix. Anyone who is serving in the military needs to be aware of how debt can negatively affect their military career. Most people by now should understand that the military will pull a credit report on anyone who is applying for a security clearance, and that the security clearance can be denied if the person is carrying too high of a debt load. If your MOS (job) depends on obtaining that clearance and it is denied, you could be involuntarily re-classed into a different job that doesn’t require a clearance… hope you like cooking if that is your situation!
What some people don’t know is that you can actually be discharged from the military for too much debt. I saw it happen to a Desert Storm vet back when I was a private in 1999. Once the Commander got the letter of indebtedness, and it was determined the soldier couldn’t pay it, they proceeded to revoke his security clearance for it. Since our MOS required a Secret level clearance, he had the choice of being involuntarily re-classed into a new career field or separated under Article 134 of the Uniform Code of Military Justice (UCMJ). He chose separation over becoming a cook.
Years later, as a Sergeant, I had to write one of my soldiers up for being in debt that he couldn’t pay. I had to take him to budgeting class, since the bad debt was a repossessed car, and he ended up with extra duty and and a repayment plan drafted up by our Commander.
Anyone who has ever served knows that the military pay is less than generous when compared to the civilian equivalent. So it becomes imperative to operate your household on a budget in light of the negative consequences of debt!
Military and Debt Regulation: Article 134 of the Uniform Code of Military Justice (UCMJ)
Here is the excerpt of Article 134 that the specialist was discharged under, and that I wrote up my soldier for:
Article 134 – (Debt, dishonorably failing to pay)
(1) That the accused was indebted to a certain person or entity in a certain sum;
(2) That this debt became due and payable on or about a certain date;
(3) That while the debt was still due and payable the accused dishonorably failed to pay this debt; and
(4) That, under the circumstances, the conduct of the accused was to the prejudice of good order and discipline in the armed forces or was of a nature to bring discredit upon the armed forces.
Explanation. More than negligence in nonpayment is necessary. The failure to pay must be characterized by deceit, evasion, false promises, or other distinctly culpable circumstances indicating a deliberate nonpayment or grossly indifferent attitude to-ward one’s just obligations. For a debt to form the basis of this offense, the accused must not have had a defense, or an equivalent offset or counterclaim, either in fact or according to the accused’s belief, at the time alleged. The offense should not be charged if there was a genuine dispute between the parties as to the facts or law relating to the debt which would affect the obligation of the accused to pay. The offense is not committed if the creditor or creditors involved are satisfied with the conduct of the debtor with respect to payment. The length of the period of nonpayment and any denial of indebtedness which the accused may have made may tend to prove that the accused’s conduct was dishonorable, but the court-martial may convict only if it finds from all of the evidence that the conduct was in fact dishonorable.
Lesser included offenses. None.
Maximum punishment. Bad-conduct discharge, forfeiture of all pay and allowances, and confinement for 6 months.
As you can see, excessive debt can have a severe impact on your career. It will also have a negative impact on your personal life. But debt is only part of the total picture when it comes to your security clearance and background check.
Your Security Clearance Background Check Looks at More the Just Debt
Your credit report is often included in your background check when you apply for a security clearance or apply for a new job. Why your credit report a consideration for a security clearance, or in a job search? Here are some reasons your amount of debt and your credit report can impact your background check:
Security Clearance Background Check
Your credit report is a sign if your trustworthiness. If you will be working with sensitive information, or if you are in a position where you are handling money, the government or another employer wants to know whether or not your poor financial situation would make you vulnerable to bribe attempts. If you have a lot of debt, there is the concern that you would be willing to sell classified or proprietary information, or that you might embezzle funds that you are overseeing.
Reducing Behaviors to Numbers
Your credit report is often considered a direct reflection of the financial risk you represent to an employer, lender, or other entity. Everyday, employers, insurers, lenders, cell phone providers, and others make decisions about who they think will be reliable based on information in your credit report. It’s not personal. These organizations simply crunch the numbers and base their decisions on the law of averages. The way to get that in your favor is to increase your credit score.
Action Steps – How to Control Your Debt and Improve Your Credit Report
The amount of debt you have and your credit report aren’t necessarily directly related. But one can impact the other. When you are applying for a security clearance, your entire background will be reviewed, not just your financial risk.
How to get out of debt quickly:
- Create a list of all your debts (credit cards, car loans, mortgages, student loans, medical bills, and anything else you may have).
- Organize the information. List the minimum amount due on each payment, along with the interest rate.
- Create a repayment schedule, starting by paying the minimum on all loans except the one with the highest interest rate. Note: Some people prefer to start with the loan with the lowest balance, to pay that off more quickly, so they can direct that payment toward the next lowest balance. This is called a debt snowball, and is another excellent way to pay off debt quickly.
- Repeat this process until you have paid off most, or all, or your loans.
- You can find more detail in this guide to getting out of debt quickly.
How to improve your credit score:
- Start with a copy of your credit report. Here is how to get a free copy of your credit report each year).
- Next, get copies of your credit scores. Credit reports and scores are different – the report is like a report card, with a list of all open accounts, and any negative actions. The score is a numerical representation of your report. Here is how to get a free credit score.
- Correct any errors on your credit report.
- Focus on paying all bills on time. Get up to date on all bills, starting with any overdue payments. Next, continue making all payments on time, every time. Finally, pay off your loans, and try not to take out new loans, rack up more debt, or open new accounts. All of those actions can have a negative impact on your credit score in the short term.
- Sign up for a credit monitoring service to track your progress. Two free options are Credit Karma and Credit Sesame.
Following these steps will put you in a better financial position, and also make it easier for you to be approved for a security clearance or other background check.
This is a guest post from Ana, the author of the blog Debt-Free Revolution. Ana is “an Army wife, an Iraq veteran, a college student, a mom, family CFO, and a “Pizza Delivery Expert” a.k.a. a Domino’s pizza delivery driver to get her family out of the chain of debt!”