Offered job sponsoring secret clearance - Default loan issue?

SECURITY CLEARANCE Q&A
1

Hi all,
First time here. I’m a bit concerned on some factors regarding secret clearance as I’m new to the process and was given a preliminary clearance questionnaire that asked about basic questions the SF86 would ask, and one was about default loans/bankrupty etc. I had a loan that got charged off in 2022, and I had no idea I thought it was on auto pay and notifications were sent to an inbox I wasn’t monitoring at all at the time. I remembered it last year and paid off about half, it was 1700, so there was about 800 left. I paid off most of it a couple of months ago before being laid off, and I finished off paying the final 160 yesterday.
I have a couple of maxed credit cards, and my credit score is 620~ give or take. I’ve only ever missed 2 payments in the past 10+ years, showing a 99% payment history. My plan is to ask a buddy to help pay off my cards and I’d pay him back, and doing some simulations it would spike my score up to 700+. Would I have a any trouble with getting a secret if this was all done after accepting the job offer and doing the SF86?

tl;dr Credit score 620 atm, can get it to 700 by paying off 2 cards. I have 1 charged off loan in 2022 I was unaware of because I thought autopay was going through, it wasn’t, strong credit history otherwise. I just finished paying it off yesterday (the last 160). Will I have a strong chance at a secret or will this possibly hurt me? No other issues on the SF86 listed.

2

You paid off the one loan (2022 charge off) so that is good. As far as “maxed out” credit cards, I think if you are at least making the minimum payment and not incurring any late fees, that is OK (though not great).

But two “maxed out” credit cards and a recent loan problem could possibly be a “pattern” of financial issues. I don’t think that is automatically disqualifying but will probably attract questions and you’ll need to have documentation to show to the investigator (if it comes to that). It sounds like you are on track to clear everything up so that is a strong factor in your favor.

I’m sure some of the investigators who read these forums have seen people with worse financial histories get cleared.

2 Likes
3

That’s good to know! Thanks for that insight, it makes sense. Do you by chance know if the amount makes a difference? One is 4k and the other is 700, nothing extremely high, and I’ve always made my monthly payments.

4

I’d have to defer to the investigators on that point.

5

I’d expect adjudication to ask more documentation. When cleared, you cannot live this way. At all. It isnt healthy when uncleared but only you pay that penalty through high interest rates, and not much disposable income.Be prepared to show the loan was paid and you are making steady payments.Dont close cards, just pay them. And dont explain the “email to a box you didn’t monitor.” Regardless we are responsible for our debt and telling that yarn just reflects poorly.

6

Thanks for letting me know. That is completely understandable and I do not plan to continue using my cards so often. I plan on clearing out the cards, paying back my friend with my next few paychecks from the new job while the investigation is underway, and do better going forward. So to my understanding from what you said, I will have a chance to explain the loan, that it was paid off, and it was one error that will not happen again and it won’t be an automatic disqualifier. Not to question your answer, but I thought secret was more lenient so long as there was no debt in collections, and little to no missed payments.

7

If I may add some extra credit that might bring some comfort in the long term;

Consider searching and finding a reputable youtube personal-finance channel that you connect with, or that resonates with you (there’s quite a few out there these days ‘money guy show’, ‘dave ramsey’, etc etc) there are some good healthy info that’s good to soak in or share with personal finance.

We’re all in unique financial situations, your amount of debt sounds miniscule compared to millions of others. Though as Amber mentioned the habit/approach is something that you’ll probably want under control.

I’m only mentioning this cus credit card debt used to be one of the things I used to worry about a long time ago.

Hope the best for you!

1 Like
8

The standards are the same. But missing a loan is rather common. Processed many to success. The key is addressing it. FICO scores arent used, but they are a solid indicator of financial behavior. It can show you successfully overcame past bad practices and habits. Build a binder with statements, document protectors, etc. If you find another debt reach out to holder…negotiate a payback. Chances are they sold it. Once the company writes off, no need send money. But an aithorized debt collector can collect…and they too can be negotiate with. The big thing is full transparency.

9

Got it! Thanks for your input and knowledge. I’ve had multiple loans, personal and payday loans, at least 3-5 of them and I’ve had no issue with those (a car loan that is also paid off), as I’ve paid off at least 3 of them and 2 are current and all of them have always been paid monthly. The only issue was that one written off loan. Cards haven’t been an issue, and knowing the severity now of maxing my cards I plan to keep my card usage at a minimum if given a clearance. The concern is more so obtaining one rather than maintaining, as I plan to do much better. I don’t think the company sold off the debt, as I still see it on their website when I login and I get emails stating that I’ve scheduled a payment with them and not some collection agency. (Nothing in my collections when I checked my credit reports recently)

1 Like
10

Thank you so much! Yeah I’ve been told my debt doesn’t really have cause for concern, possibly the habit, but I was also told that the fact a lot of people tend to max out their cards, so long as I pay off my debt/make monthly payments it’s not an issue. It’s definitely something I will have under control, as I didn’t understand the severity of it years ago.

11

Try to stay away from pay day loans. Life throws curve balls I get that. But their rates are insane. Look at debt to income ratio and keep revolving credit under 25%. It will be tight for 8 months or so and you cant do the fun stuff till you take care of the bill stuff. Bring that into equilibrium and your score improves. Hard to break spending habits. But keep your eye on the bigger prize of cleared well paid work.

2 Likes
12

Got it, more optimistic knowing all this from everyone’s help with their expertise and knowledge, thanks!

13

Try to live well below your means and pay off debt as quickly as you can. Showy lifestyles and large debt that overshadows your annual salary is a red flag and makes you personally vulnerable to financial coercion.

1 Like
14

Former Special Security Officer - for your situational awareness. It looks like you are taking actions to handle and pay off your debt - that’s good. I wouldn’t have a friend to pay off my debt - it can make your friendship go bad real quick. Please know this, when it comes to credit card debt the big thing that DCSA wants to know is if you are paying and current on your loans (it really doesn’t matter if you were late a few times) - that’s it. Your credit score does not matter per-se. I’ve had guys that had 500’s and put in for a clearance and they received it because they outlined their debt, how much was being paid per month, and projected when their said loan(s) would end.

All you will have to do during the SF-86 process is to be up front and submit a detailed financial repayment plan in your Questionnaire for National Security. Be specific and be concise with the data that you give regarding your financial debts. Essentially stating - who owns the debt, the total amount owed, interest rate, payment amount that you pay per month, and projection of when (if you keep paying the same monthly rate) said loan will be paid off.

I’ve had guys put their data into an XL Spreadsheet and neatly list out their debtors, debts, apr’s, monthly payment amounts, etc… line by line. This makes it so much easier on DCSA Adjudicators to visually digest and consider your financial situation. Yes, I’d include the cards that you have paid off already (recently) on that XL master list too. Also, make sure to have your digital PDFs/proof of your ‘paid off’ accounts as being paid. You will also have to submit recent CC statements (PDFs) showing your current balance on each of your high balance credit cards. Again, it’ll give the Adjudicator a clear view of your debts, the payments, and when they will cease to exists.

Another major thing that will help you with your SF-86 application will be for you to take a free or very low cost federal or State recognized Credit and Financial Counseling Course and save that certificate. You should submit the certificate(s) with your SF-86. By doing so, DCSA will see that you not only know your debts, are paying your debts, will pay off your debts (on projected dates), but that you have taken the Self-Initiative by educating yourself to become more financially astute. This will relay to the DCSA Adjudicator that you desire to learn how to do better and that you could be a trustworthy fiduciary of a govt clearance. Yes… I know this process very well because I’ve had to guide many military personnel and US Govt civilian employees through the process : )

Now here’s my last honest recommendation. After you are hired on and you pay off each of those credit cards - Close those accounts and for the love of all that is good - Shred those Credit Cards : ) . You do not need all of those darn credit cards. They’ll get any of us into trouble. So as you put all of the past behind you, just go with cash (yes, likely borrow to buy a house though) and your clearance eligibility will stay in the green. It looks like you will be fine, but you will definitely have to spell out to DCSA that you have a salient plan to get out of debt and to stay out of debt (in the future). The field of opportunity is still before you. Best wishes to you.

Oh yeah, drop in to your organizations Industrial Security Officer (ISO) office and have a chat with them about this. They are often really good folks. They will likely say nearly the same thing that I’m saying. It’s good to get people on the ground into the know. They’re there to help.