Debt and Your Military Security Clearance

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Members of the military dealing with credit card debt face an extra level of penalties if that debt becomes delinquent or excessive: They could lose their security clearance, be denied promotions and, in extreme circumstances, face dismissal.

“Being kicked out or discharged altogether because of excessive debt and/or the inability to pay debt is a huge fear factor in the military,” said Chris Fitzpatrick, deputy director for VeteransPlus, a nonprofit organization dedicated to improving financial leracy in the military.

“Unfortunately, it happens more than people want to talk about.”

The number of individuals with a security clearance is down 17% over the past eight years. How much of that can be attributed to financial problems is unknown, but estimates say financial woes are responsible for half the number of people denied security clearance.

With so of the economy reliant on sensitive technology information, having a security clearance makes for a popular job candidate, whether in the military or civilian workforce.

What is Guideline F?

The federal government has a 27-page document called Security Executive Agent Directive 4 that outlines its expectations of people requesting security clearance and the reasons why they can be denied. The document goes through a number of areas, including personal conduct, sexual behavior, alcohol consumption, drug use and others.

Guideline F of that document is specific to “financial considerations.” It details what is expected and the onus is put on the individual in the first sentence, which reads:

“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.”

It also points to specific mistakes that could cost a member of the military their security clearance. That list includes:

  • Inability to satisfy debts
  • Unwilling to satisfy debts regardless of ability to do so
  • History of not meeting financial obligations
  • Deceptive or illegal financial practices
  • Consistent spending beyond one’s means
  • Failure to file or fraudulently filing taxes
  • Unexplained affluence
  • Borrowing money to fund gambling
  • Concealing gambling losses

However, Guideline F also acknowledges that people can’t always control the circumstances that cause their financial problems. Things like divorce, unexpected medical bills, death or identity theft are a few things that cause someone’s finances to spin out of control and are not necessarily a reflection on their willingness to act responsibly when it comes to paying off debts.

Guideline F also includes suggestions to deal with problems such as making a good-faith effort to pay down overdue debts or seeking help for the problem from a nonprofit credit counseling agency like InCharge Debt Solutions.

Why Debt Hurts the Security Clearance

Debt always has been a major concern for the military and the reason is obvious: Anyone delinquent in paying their bills could be desperate enough to take a bribe or kickback in exchange for passing along classified secrets.

The Department of Defense (DoD) says it does not have accurate data on how many servicemembers were denied a security clearance because of problems with delinquent debts, but people very familiar with the subject say delinquent debt is the No. 1 cause for denying or revoking security clearances.

“We’re dealing with more than 350,000 (service) men and women and based on what we hear from them, debt is still the No. 1 cause to deny or revoke security clearance,” John Pickens III, executive director of VeteransPlus, said. “The calls we get are often at the 11th hour when soldiers realize their security clearance may be at risk. They may not get promoted, they may have to be re-assigned to a job not requiring clearance. There are consequences.”

How Does Bankruptcy Impact Security Clearance?

 The optimistic answer about whether bankruptcy can impact your security clearance is “No, it won’t!” And from a strictly legal standpoint, that is probably accurate.

The Defense Department’s adjudicative process examines a number of variables before deciding whether a person is an acceptable security risk. Maybe the most important variable involved is what caused them to get so far into debt that bankruptcy was the best solution?

If the answer is something unpredictable like a sudden illness, loss of employment, a death or a divorce, then bankruptcy is a reasonable response to a financial downturn no one could have predicted. If the person sought help by going in for credit counseling or some other responsible means of dealing with it, filing bankruptcy may not squash the security clearance.

On the other hand, if the cause of the problem was poor financial decisions, careless spending, gambling or some other irresponsible behavior that caused a candidate to file bankruptcy to get out of it … well, that might raise too many questions to obtain a security clearance.

Is There a Debt Limit to Obtain 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. If you make good-faith efforts to repay the debt every month; go to a nonprofit credit counseling agency for help with budgeting and best ways to eliminate debt; curb your use of credit cards; or find a cheaper place to live, you have demonstrated that you are trying to get the problem under control.

If you simply ignore it and let the situation spiral out of control, then obviously you could do the same thing with military secrets and your security clearance be denied.

It may be smarter to focus less attention on the amount of debt that how that debt influences your debt-to-income (DTI) ratio. Debt-to-income is the percentage of your income that goes to making monthly debt payments on things like housing, utilities, car or student loan payments, etc.

When calculating your DTI, lenders like to see the result as low as possible. In other words, if you’re using just 15%-20% of your income on debt, that is a great thing. Somewhere around 36% is considered a good debt-to-income ratio. Anything over 43% is considered a bad ratio.

If you need to lower your DTI, the easiest way is to cut expenses – no more eating out; find a cheaper apartment or car; spend less on clothing – and increase income with a second job.

Taking any of those steps will be looked on favorably as a candidate for security clearance.

How Military Families Get in Debt

The military stresses discipline and responsibility with its members, but the same debt problems that trap civilians, also snare servicemen. Low pay, especially at the entry level, is the primary reason soldiers fall behind. Inexperience handling money is a close second.

From there, the list is very familiar to anyone, military or civilian, who has suffered financial setbacks: overspending; upside down loan obligations; unwillingness to stick to a budget; unexpected medical bills; divorce; gambling and financial illiteracy are some of the symptoms that cause financial stress.

Much of the blame for the problems can be laid on credit card use. Service members aren’t any better than civilians at keeping up with credit card debt. The Defense Manpower Data Center (DMDC) conducted a survey of active military members in 2013 and found 39% were short on cash between paychecks. The DMDC survey also said 16% of those surveyed were maxed out on their credit cards.

VeteransPlus surveyed more than 20,000 active duty members in 2015 and found the debt-to-income ratio among families was 46.5 percent, mostly because of credit cards. Experts say that a 37% debt-to-income ratio is healthy and anything over 43% is a sign that trouble is all but inevitable.

Payday Loans Still a Problem for Military

Payday loans and car title loan companies are another major source of financial distress among military members, despite passage of the Military Lending Act in 2007. The MLA restricted lenders to charging no more than 36% on short-term loans to service members, but some still found ways around the law.

For example, the interest rate cap for payday loans applies to loans of $2,000 or less. Anything above $2,000 and the cap no longer applies. For car title loans, the cap applies to loans of six months or less, but if the lender extends the terms beyond that, the cap no longer applies.

“The current rules under the Military Lending Act are akin to sending a soldier into battle with a flak jacket but not helmet,” Consumer Financial Protection Bureau Director Richard Cordray in a CFPB release. “To give our troops full-cover protection, the rules need to be expanded.”

How Service Members Deal with Debt Problems

Service members who want to keep all options open – i.e. security clearance, promotion, etc.– have a variety of military debt relief options.

The Servicemembers Civil Relief Act has a number of provisions that will help active duty or deployed military members limit financial responsibilities that might otherwise put them in serious trouble. The SCRA caps interest rates on credit cards, mortgage and certain other loans at 6% and allows service personnel relocated for more than 90 days, to terminate cell phone service and housing leases without penalty.

Most bases now have offices that focus on debt relief for both officers and enlisted personnel. Organizations like VeteransPlus are staffed by retired veterans who have first-hand knowledge of both the problems and solutions regarding debt in the military life.

There also are resources outside the military, such as nonprofit credit counseling agencies that offer free advice on budgeting, debt consolidation and debt management programs that could alleviate the pressure and stress that come with delinquent debt.

The biggest problem is convincing military personnel to take advantage of the options.

“You have to understand the culture of military men and women,” Fitzpatrick said. “They learn to handle situations and become self-sufficient in many ways, except for their financial lives. Everything gets paid for – food, room, clothes, travel – and by the time they realize they’ve mismanaged their money, it’s too late. Some get angry, some get scared and they only seek help as a last resort.”

About The Author

George Morris

In his 40-plus-year newspaper career, George Morris has written about just about everything -- Super Bowls, evangelists, World War II veterans and ordinary people with extraordinary tales. His work has received multiple honors from the Society of Professional Journalists, the Louisiana-Mississippi Associated Press and the Louisiana Press Association. He avoids debt when he can and pays it off quickly when he can't, and he's only too happy to suggest how you might do the same.


  1. N.A. (2017, June 8) Security Executive Agent Directive 4. Retrieved from
  2. Henderson, W. (2020, September 1) The Impact of Delinquent Debt on Security Clearances. Retrieved from
  3. Connolly, G. (2021, June 7) Security clearance demands are exploding and government must keep up. Retrieved from