Military service members who don’t want to jeopardize their security clearances are facing new pressure to watch their finances and keep close track of their credit reports.
Unlike in the past, when the government checked the credit of clearance holders only every five to 10 years, it is now launching a system of continuous credit checks. The change, designed to prevent security breaches, is happening as the Department of Defense (DOD) takes over a clearance process previously run by the Office of Personnel Management.
For members of the military and others with security clearances, the new approach heightens the importance of paying bills on time, not taking on excessive debt and promptly correcting problems in credit reports. “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,” warns the Consumer Financial Protection Bureau (CFPB). “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 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.”
Service members can take a variety of steps to reduce the odds that their credit reports will pose a problem for their security clearances. In addition to practicing good financial habits, they can do the following:
- Apply for free credit reports. Federal law allows everyone to get one free credit report every 12 months from each of the three major reporting companies — Equifax, Experian and TransUnion by using this website: AnnualCreditReport.com. Beware of other websites promising free credit reports that may try to lure you into paying for services you don’t need. A good way to monitor your credit periodically throughout the year is to request a report from each of the three credit reporting companies, but space out those requests every several months.
- Get a free credit score and analysis. Service members and their spouses can get a free FICO credit score and an analysis of their credit through a program sponsored by the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation. To use the program, contact financial counselors at any military installation in the U.S. and around the world. Shay Cook, financial readiness manager at the foundation, says service members can learn about specific errors that are hurting their scores, such as information involving relatives and people with similar names mistakenly included in their files by the credit reporting companies. Since 2010, more than 200,000 service members and spouses have used the credit score management and education tool, Cook says.
- Challenge errors on credit reports. If something looks inaccurate, dispute it by following the instructions on the credit report. The credit reporting companies are required to investigate when you notify them of a mistake. If they fail to correct errors in your credit reports, contact the CFPB.
- Consider setting up a fraud alert while away on active duty. Service members on active duty can set up a special credit alert while they are away that notifies credit reporting companies of their status and limits access to their credit files. As of May 24, 2019, the credit reporting bureaus will be required to provide free credit monitoring to anyone on active duty in the military or in the National Guard.
- Consider freezing your credit files. A freeze blocks legitimate lenders as well as criminals from getting access to your credit files unless you take steps to lift the freeze. A new law requires that as of September 21, all consumers can set up such freezes for free at the three credit reporting companies. To be fully effective, it’s best to set up freezes at all of them.