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Minimum required credit score for a military officer?
Old 01-25-2010, 09:52 AM   #1
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Minimum required credit score for a military officer?

I was having lunch with a group of friends and acquaintances yesterday. One of my acquaintance's friend was a Lieutenant Colonel (LC) in the Army. At one point, the conversation subject turned to the current real estate mess in the north east. The LC said he's struggling with his investment up there. My friend was surprised and asked why he didn't turn the bad investments back to the bank. The LC said he couldn't. If he did, his credit score would plunge below certain level, and he would be fired.

Is there any truth to it? I could not believe what I heard. That sounded too extreme for me. Does that also mean that officers are not allowed to declare bankruptcy too?

Thanks,
Sam
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Old 01-25-2010, 10:08 AM   #2
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I'm not aware of any requirement for military personnel (O's or E's) to maintain a particular credit score, but at least four other things do come into play:
- All military personnel are expected to behave responsibly, to keep their word, and to discharge debts they owe. Now, "debts they owe" is subject to some interpretation, as we've discussed on the threads related to walking away from home mortgages.
- On a more concrete level, almost all military personnel must maintain a security clearance. Being in a bad financial situation makes an individual more susceptible to attempts to gain sensitive information from them, so declaring bankruptcy or having other adverse actions on your credit report can lead to an individual being barred from access to sensitive material or being denied renewal of their clearances. This can be bad or very bad from a career standpoint.
- Depending on the circumstances, getting yourself into a bad financial situation can properly be viewed as demonstration of poor judgment. This will be more important if the individual is more senior (enlisted or officer). Poor judgment (on or off duty) is sufficient reason for a boss to downgrade a fitness report.
- If an individual has financial trouble (whether his/her fault or not), it may make him/her exempt from deployment (because the situation could get worse, and bosses in the field expect people to have their minds on the job at hand. They especially don't want to have t send somebody home to deal with the other issues that attend a financial meltdown). Being non-deployable is not career enhancing.

So, your friend is probably assessing the situation correctly.

The military is a very paternalistic environment. People get their pay, and then they get quarters provided for themselves and their family. If they don't or can't live on post, they get a monthly allotment to pay their rent. The military takes care of all their medical expenses and most of the expenses of their family. There are plenty of support services, from chaplains to counselors to gymnasiums to hobby opportunities. So, given all this handholding, the military leadership expects people to stay on a fairly even keel, to eschew the promise of the financial "jackpot" that might come from taking more risk in favor of a sedate, steady, conservative financial life. An officer, and especially an O-5, is getting paid enough that there should be no trouble in maintaining a comfortable life for a family. If someone gets in trouble by taking greater risks, there's not a lot of sympathy. Now, the big drop in RE prices is an unusual event, and if a servicemember got in trouble because his primary residence dropped in price and he had to sell it at a loss in order to move, that would gain some pity points. But if someone is holding a property as an investment and the price drops--not so much.
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Old 01-25-2010, 10:40 AM   #3
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As a (civilian) federal employee with a security clearance, part of that clearance was checking my credit score. I got the job right after my divorce, when my credit was in the toilet so I was pretty worried about passing. They must not require much!

I heard from others in my agency that if your credit score went down, you'd get in trouble and could lose your job since maintaining a clearance was required for the job. Similarly, if I hadn't paid my federal income tax I would have been in trouble. I didn't test either of those to find out what would happen, though. I am sure that declaring bankruptcy would have consequences and could have resulted in losing my job as well.
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Old 01-25-2010, 11:02 AM   #4
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Originally Posted by Sam View Post
The LC said he's struggling with his investment up there. My friend was surprised and asked why he didn't turn the bad investments back to the bank. The LC said he couldn't. If he did, his credit score would plunge below certain level, and he would be fired.
What SamClem said. Sounds like the officer's oversimplified (or overly tactful) answer caused even more confusion.

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Originally Posted by Sam View Post
Does that also mean that officers are not allowed to declare bankruptcy too?
No, but it's probably tacitly discouraged.

Finances can be one of the military's dirty little shameful secrets like medical problems or stress or substance abuse. Commanders want "zero problems" and they generally have a poor understanding of the issues*, so when something like this crops up then it's assumed that the officer is the source of the problem, should've known better, had crappy judgment, can't handle his life, and is generally a dirtbag. The people who should be seeking the help can see what examples are being made out of others, so they avoid getting help until a minor cloud on the horizon turns into a freakin' no-notice disaster crisis.

The military does make a lot of resources available on basic financial responsibility, and then says that servicemembers are required to be financially responsible. So if someone gets into financial trouble, then the assumption can be made that they're not following orders... just as a CO can be fired for running aground when he wasn't actually the one who gave the rudder commands.

Financially/economically it makes perfect sense to walk away from an underwater mortgage. However society imposes an element of personal responsibility that the mortgagee was expected to understand as part of signing the mortgage documents in the first place. From society's perspective, bankruptcy is unacceptable no matter how logical it may be. The martial culture of personal accountability/responsibility is how the military views an attempt to file for bankruptcy. Servicemembers should "pay their debts", not "avoid" them. It doesn't matter whether this happened due to their own fault or by dint of some other disaster.

The best COs I ever had for these tough personnel situations were the ones who were divorced penniless recovering alcoholics. They understood.

* I can't tell you how many times I heard a senior officer say "I don't have to understand money, I just turn my paycheck over to my spouse and let them take care of it." These were the same people who favored life advice like "Have military ID card, will travel", "Why would you give up a perfectly good base house to live out in town with civilians?!?" and "If the military had meant for you to have a family then they would have issued you one!"
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Old 01-25-2010, 01:09 PM   #5
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If someone gets in trouble by taking greater risks, there's not a lot of sympathy. Now, the big drop in RE prices is an unusual event, and if a servicemember got in trouble because his primary residence dropped in price and he had to sell it at a loss in order to move, that would gain some pity points.
Thanks Samclem. So, there are no hard rules, just general guidelines, and each case is treated differently based on the circumstances. Correct?

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What SamClem said. Sounds like the officer's oversimplified (or overly tactful) answer caused even more confusion.
Thanks Nords. I think you're right. Thinking back, it did sound like a oversimplified explanation. There were too many not-so-close friends at the table.

So how often does the military check their officers' credit score? Once a year? Or do they have special arrangement with the credit bureaus in such a way that the credit bureaus would raise a flag when an officer's score dropped to a certain level? BTW, that's a question, not a suggestion.
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Old 01-25-2010, 01:16 PM   #6
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As a (civilian) federal employee with a security clearance, part of that clearance was checking my credit score. I got the job right after my divorce, when my credit was in the toilet so I was pretty worried about passing. They must not require much!
Did you ever found out what the required minimum score was?
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Old 01-25-2010, 02:09 PM   #7
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So how often does the military check their officers' credit score? Once a year? Or do they have special arrangement with the credit bureaus in such a way that the credit bureaus would raise a flag when an officer's score dropped to a certain level? BTW, that's a question, not a suggestion.
I don't know if the military even bothers to check credit scores. It might be done as part of a routine security-clearance investigation but if so it's not included in the summaries that the investigators give to the chain of command.

Generally the SECRET/TOP SECRET clearances had to be updated every five years with a new investigation, but that was frequently subordinated to budget constraints. I've never heard of credit bureaus flagging scores, but with today's greater computing power that could be a new revenue center initiative.

The chain of command generally found out about financial problems when the miscreant didn't pay their govt travel credit card bill (understandable during dispute situations), or used the card for personal expenses (big no-no), or when the command received a complaint letter from a debtor (extremely big no-no). OTOH it was considered routine to see all sorts of financial problems during divorces.

I've heard of one command that learned of an officer's financial problems when NCIS snapped him up during a sting. Agents were posing as "Eastern European journalists" paying for classified info on weapons systems.
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Old 01-25-2010, 02:09 PM   #8
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Did you ever found out what the required minimum score was?
No, and I never found out what my own score was at that time That was before the days of easy access to one's FICO score. It must have been pretty low, though. I had just been turned down for a couple of Mastercards, a Sears card, and a furniture store loan to buy a mattress. Nobody would lend me nuttin' because of the financial mess we call divorce.

Edited to add: The FBI agent who did my clearance was very young and wet behind the ears. He asked me a lot of questions about whether I was late on my rent and if I had any unpaid traffic tickets, asked for my landlady's phone number, and got a lot of other phone numbers of neighbors and friends. So, maybe he called around to get other info on whether or not I was in bad trouble.
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Old 01-25-2010, 02:52 PM   #9
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For a security clearance, they do check your credit. Another issue not raised is that during your security clearance process, they are trying to find out if there is some behavior on your part that could compromise you, i.e., you are in debt so may be tempted to bribery; this coupled with other behavior not conducive to being a good officer (think drunkeness, promiscuity, lying, etc - all those things we're told not to do from an early age on) could possibly be exploited - i.e. a weakness.

The military frowns on untoward behavior - there are reasons why the military is one of the most trusted American institutions; we do police ourselves and do it fairly publicly. Compared to some of the civilian places I've worked and some of the people I've worked with in my civilian career, the military has been the most strict with regard to professional and personal behavior. Now, that doesn't mean there aren't those who like to push the envelope (inevitably, they were in my squadron when I was the commander) - however, usually those envelope pushers are either released or rehabilitated.

As for paternalistic - I'd call it socialistic in a sense - HOWEVER - it does work as the purpose of the DoD is to wield aggression in defense of our nations and its interests. You do not want some drugged out, over debt-extended, mind not on the mission at hand young troop/airman/sailor/coast guardsmen carrying firepower. Discipline is key - and yes, maintaining behavior that is considered 'good' in our society requires self-discipline.

Another thread could be started on how some use the external enforcement of discipline to help in the internal self-discipline - I believe some of those who pushed the envelope were incapable of internal discipline and required an environment like the military to help them (to use the naval term) square-away. Those guys are the commander's headaches - yowza. I used to ask them why they persisted as there were other corporate cultures that would allow them to behave in the way they did.....
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Old 01-25-2010, 03:43 PM   #10
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You do not want some drugged out, over debt-extended, mind not on the mission at hand young troop/airman/sailor/coast guardsmen carrying firepower.
We have seen some tragic recent examples of this.
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Old 01-25-2010, 04:44 PM   #11
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It is my understanding that some civilian pre-employment screening now also looks at credit and adverse financial actions on one's record.
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Old 01-25-2010, 04:50 PM   #12
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Seems like they risk encouraging the very behavior they're trying to avoid by removing the 'out' of bankruptcy. If someone really felt he needed to avoid bankruptcy at all cost, yet was basically insolvent, he could be tempted to do something stupid to drum up some cash.
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Old 01-26-2010, 06:59 AM   #13
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Your credit score for the purpose of a background investigation is irrelevant. All the investigation is concerned with is if you are making your payments and if you are a security risk. What is looked at is how much are you paying in credit, compared to how much income you have. If your credit payments do not "fit" your income, why. For example if you are paying 10K per month in credit but only make 2k in income from all sources. Are you making your payments, and if not, why (I went on way too many of these investigations, I hated them). Just because you have late payments, bankruptcies, defaults, or some other issue does not automatically disqualify you for a clearance. There can be mitigating circumstances that must be taken into consideration. Divorces, job loss, bad economy, health issues, death of a spouse, unlimited things can have a negative effect on a person's credit, but is not a reflection of the intentions or ability of the person under consideration for the clearance.

Edited to add: A bankruptcy can not be taken into consideration for a clearance, but the reasons for the bankruptcy can.
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Old 01-26-2010, 09:07 AM   #14
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While I have been out of the service for longer than I was in it, there was one rule impressed on officers. You don't write bad checks! You don't do things that would reflect poorly on yourself or other officers. While a poor credit score may not effect some LT Col's promotion, a foreclosure could. I remember reading the review of an Air Guard officer that said 'Capt. XXXX is a commercial artiest in his civilian life. He is presently unemployed.' He did not get promoted to Major. Officer promotions past the rank of Capt. use to be one of the most competitive things around. Boards looked for reason not to promote rather than reasons to promote. A foreclosure would be a perfect reason not to promote, unless a large percentage of those up for promotion also had a foreclosure.
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Old 01-26-2010, 11:34 AM   #15
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Officer promotions past the rank of Capt. use to be one of the most competitive things around. Boards looked for reason not to promote rather than reasons to promote.
That officer's boss sure sent a signal: "I can't think of anything else to say about this guy, so I'm going to comment on his employment status. And he's so dumb that he'll probably think it's a compliment and won't challenge my assessment."

Holy cow. As recently as five years ago the submarine force's promotion rate of O-3s to O-4s was 107%. The selection boards were actually going back through the cesspool results of previous boards to find passed-over officers who might have been released on probation rehabilitated their performance to now be worthy of O-4.

O-4s were in such short supply that the O-5 selection board was directed to not "early promote" any submarine O-4s to O-5. Everybody had to serve their full time in rank with no sentence reductions for good behavior.
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