Want to Join the Armed Forces: Be Sure to Check Your Credit First

The requirements for serving your country include both physical and financial fitness. Much like the civilian world where more employers are now requiring credit checks to qualify for employment, the military branches have also determined that financial responsibility impacts performance in the field.

Financial reviews are used when enlisting in the military along with checks that occur with security clearance applications and reviews. Having poor credit can lead to denial of a sought after security clearance or the loss of one you already have. According to the military, over 50% of security clearance denials are due to failed financial background checks. In some branches the number is as high as 80%.
Debt loads have risen sharply in the general population over the last decade. The military has seen similar issues with applicants as young as 19 struggling with too much debt. The result is increased scrutiny of the financial well-being of applicants at the recruitment level. The key concerns are carrying too much debt, owing child support or having a bankruptcy on file. Most branches take a holistic view and consider the reasons behind the debt struggles. Patterns of indebtedness and bad financial choices demonstrate questionable decision making skills that are essential for honorable military service.

Why Does Your Financial Status Matter When You Enlist?

According to the Department of Defense, all members of the armed forces are required to meet their financial obligations, requiring recruits not only to be physically fit, but to also be responsible, trustworthy and reliable. The financial picture of a recruit can give a window to the applicant’s possession of these necessary traits. Financial tests for indebtedness are run against the military pay you will be receiving not necessarily your current income.

What Are The Requirements?

Each branch of the military has different requirements to pass the financial readiness test. Some branches, like the Air Force and Coast Guard, run background checks on every candidate. Others only run a check if you are required to complete a dependency waiver.

The dependency waiver also requires a Financial Eligibility Determination (FED) to be completed as part of the approval process. The procedure involves examining your finances and determines how you have managed your finances. The military wants to ensure that you will be able to support your family with the military pay you will be receiving. The process will look at both your potential income and your spouse’s income, if you are married.

Items they look for include, writing bad checks, foreclosures or repossessions, high debt levels, loan fraud or tax levies, and other signs that you are or have recently been living beyond your means. They also look for any evidence of fraud or other criminal activity that involves financial matters.

Military Branch Who Is Screened What They Look For
Coast Guard Everyone who applies Any debt levels above 30% of income. Any delinquencies
Air Force Everyone who applies Any debt levels above 40% of anticipated military income, late payments, collection accounts or bankruptcy
Navy and Marines Anyone requiring security clearance or a dependency waiver High debt to income levels
Army Anyone requiring security clearance or a dependency waiver High debt to income ratio, delinquency account or foreclosures

The consequences for not meeting the requirements could be a rejection until the financial matters are resolved or a failure to get a sought after promotion.

What is a Dependency Waiver?

Recruits must prove that they can support dependents when applying for military service. Each branch has a different qualification when it comes to when a waiver must be included with the application. If a dependency waiver is needed, then a full financial background check is completed. This looks not only at a credit score, but how much debt you are carrying and how you have paid bills in the past.

  • Coast Guard requires a dependency waiver for more than one dependent if your pay grade is below E-4. If pay grade is E-4 or above the limit is two dependents. Spouse is not counted as a dependent for these rules.
  • Air Force requires a waiver if the recruit has any dependents.
  • Navy requires a waiver if there is one dependent or more, meaning a spouse or any children.
  • Marines requires a waiver for all dependents under the age of 18 (therefore the spouse is not considered a dependent).
  • Army requires a waiver if the applicant has 2 or more dependents plus the spouse.

Moving Up the Ranks

Jobs that require security clearance will require financial reviews before the initial security clearance is issued along with when the security clearance must be renewed. Any job with sensitive classifications will require regular financial reviews. Poor credit can limit promotions in the military and result in a loss of a security clearance.

Poor credit will also impact your ability to take advantage of military benefits like a VA loan for the purpose of purchasing a home, due to bank qualification requirements.

Where Can You Get Help Before You Enlist

If you are deep in debt in your twenties and want to join the military taking the minimum payment approach could take up to 30 years to pay off your debt, disqualifying you from serving due to your age. Those who wish to join the military need a much faster solution.

The first step is to meet with a financial counselor who can help review your debt situation and provide options for you to consider.

When Negotiating Debt Might Be the Answer

Debt solutions like debt negotiation can provide the ability to eliminate debt in a few years. With the debt relief, on time payments will improve your credit and enable you to get back on track. Making frequent late payments over a long period of time not only prolongs the debt through higher fees and interest, but will keep your credit score lower.

What debt negotiation does not do is guarantee that your spending patterns will change to prevent addition financial struggles down the road. If you complete a debt negotiation program and then run up your bills again, the military will see this as a negative pattern of behavior that can eliminate your chances of serving.

Resources for Members of the Military

Military bases have on-site finance managers who are there to help you set up a budget and offer basic financial counseling.

The Service Members Civil Relief Act offers a number of benefits to military members, including lower interest rates on debt, which may help you as you get your finances back on track.

Debt in the military is a growing problem as lenders offer credit to younger and younger segments of the population. One key concern for military personnel is the weight of debt burdens on service members. Calls from collection agencies, taking a second job, or being preoccupied with financial struggles, results in distractions that could put you or others’ lives in danger.


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