Paycheck Chronicles

CFPB Advises Personnel With Security Clearances to Monitor Their Credit

Classified Secret documents

The Consumer Financial Protection Bureau recently ran this article regarding security clearances and credit reports:

Situation: New security clearance rules

The federal government recently implemented new security clearance guidelines that make it more important than ever for servicemembers to stay on top of their bills and monitor their credit histories. 

Mission: Continuous monitoring

The Department of Defense (DoD) will now "continuously" monitor the financial status of servicemembers with security clearances. This means that a past-due bill or an error on your credit report could jeopardize your clearance status. 

General instructions: Changes to background investigation 

Military personnel are subject to a full background investigation. Many servicemembers, including all officers, are required to have national security clearance checks that include detailed reviews of their credit history and ability to meet their financial obligations. Prior to this change in policy, the federal government performed an initial credit check when servicemembers applied for their security clearances and performed follow-up checks every five to 10 years, depending on clearance level. 

Following a number of publicized security breaches, the President of the United States issued a directive that all federal employees (including servicemembers) in national security positions shall be subject to continuous evaluation. This means that a person who is able to access classified information can have their background reviewed at any time, including an automated review of their credit file, to see if they have a history of failing to meet their financial obligations, being in excessive debt, or having a high debt-to-income ratio

This new process might impact your DoD security clearance and prevent you from being deemed "deployable," which could greatly impact your military career unless you can prove to DoD that you were the victim of identity theft, fraud or a mistake, and that you’re currently living within your means and are making a good-faith effort to resolve your unpaid debts. Two of the most reported issues to the Bureau from servicemembers, veterans, and their families are issues with credit reporting and debt collection.

Special instructions: How to make sure your credit doesn’t harm your security clearance

To safeguard your credit record and prevent problems with your security clearance, follow these tips.

1. Check your credit report

You are entitled to a free credit report every 12 months from each of the three major consumer reporting companies (Equifax, Experian, and TransUnion), which you can access at AnnualCreditReport.com . This is the only authorized source under federal law that provides free credit reports from the three major national credit reporting companies. You can dispute any item on your credit report you know to be inaccurate, and the companies are required to conduct a reasonable investigation upon notice of a dispute. Other websites that promise free credit reports may require you to sign up for "free trials" that eventually charge you or try to sell you other products or services you may not need.  

2. Consider setting up a fraud alert or security freeze

Recent legal changes will provide servicemembers with free credit monitoring in the future to help better protect their credit record. This law takes effect in May 2019, and in the meantime, you can still contact Equifax, Experian, and TransUnion and ask them to put a freeze on your credit reports. A freeze prevents prospective lenders from accessing your credit file unless you lift the freeze for that lender or for a specified period of time. There is also a special "active-duty alert" available to servicemembers on active duty who are assigned to service away from their usual duty station. The alert notifies credit reporting companies of your military status and limits new credit offers while you’re away. 

3. Monitor your credit score 

There are numerous credit-reporting services that provide free credit scores, but servicemembers and their spouses can get a free credit score  courtesy of the Financial Industry Regulatory Authority (FINRA) investor education foundation. This free credit score is intended to help you understand how your decisions alter your score in a positive or negative way. Get your free credit score by contacting a personal financial manager at your closest military installation .

4. Call in reinforcements

If you believe that your credit record is inaccurate, you can try to clear it up with the company that reported that information and the major credit reporting companies. You can also submit a complaint to the Bureau online or by calling (855) 411-2372. 

The Office of Servicemember Affairs is dedicated to aiding servicemembers, veterans, and their families with their financial challenges throughout their military financial lifecycle. It’s part of the CFPB's mission and they are honored to help those who answered the call of service on behalf of a grateful nation. To stay connected to their work, sign up for updates on the CFPB website

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