Credit problems

[Sean00xj]

I am applying for OTS. Instead of paying off my CC's I have taken advantage of low interest offers (I have not payed a dollar in balance transfer fees). I have about 18,000 in debt on which I am paying an average of 2.5% interest. In various accounts I have 25,000 in assets. IE: stocks and bonds. I have never been late for a credit card payment. Could this have a negative impact on my OTS application. Obviously I could pay off my debt tomorrow but I choose not to as I believe I can earn more than 2.5% on my investments.

[Guest CAVOK]

This should not impact your OTS application...as long as you have a good credit rating. I recommend pulling your credit rating and seeing how your score is. There is probably some bad info on there anyways, so it will give you a chance to get Sears to close out that account from 5 years ago!

CAVOK

[DC]

If I got into OTS with my credit after I got out of college (yeah, I was young and irresponsible, and did I mention broke?) then you'll be fine.

I didn't have as much CC debt (though I had more student debt) but I didn't have a spotless credit record. "Bills? What are those?"

Anyway, I straightened it all out over time and I'm clean now.

[Guest comanche]

Be carefull canceling CC's your debt to credit ration will go way up, there for your rating will go down.

[Guest jaybird141]

Originally posted by Sean00xj:

Obviously I could pay off my debt tomorrow but I choose not to as I believe I can earn more than 2.5% on my investments.

What you say is correct if you look at it from a math perspective. I used to think that way too. I had a few thousand in debt and I always said that it was no big deal because I was making more money on my investments then I was paying in interest. Would you take a loan on your credit card to invest in the stock market? Because that is basically what you have done. I sat down and thought to myself that having no debt was a much better feeling than having a balance and always making sure that I paid my payments on time etc. I also look at it this way, take a look at how much you pay in CC payments each month. I now use that money to invest. The money that I save now is much more than I used to. I also use my debit card to pay for everything now. I used to get roped into the deal of the airline mileage card. With my debit card, I get a dividend if I use it as a master card. So every month I get $10-15 back. Much better than airline mileage.

Okay, I will now step off of my soapbox....

just my 2 cents,

-Jay

[Guest JRD]

Hi,

I'm new to this forum and have been soaking up all the great information this site contains. My million dollar question has been asked before and I guess I never got a clear answer on the subject.

Here is my background:

I'm a college graduated in which I received my Aviation Science degree (GPA at 3.5)

I have great afoqt and tbas scores.

I have a clean record, no dui, drug, or criminal background.

The LORs are outstanding...

The kicker is my credit score. I got involved with the real-estate market right out of college and bought a few houses expecting to make a huge profit. Then the market crashed, I ended up having two houses on hands that would not sell. Well, long story short, I ended up pulling money out on my credit cards to pay the mortgage of the two homes. They still didn't sell so I had to foreclose on one and got a short sale for the other. I'm in the process of cleaning things up, but it is going to take some time. Anyway, I will be disclosing all this information to the board and being upfront and honest about everything. So,

Will my credit affect their choice? If so how much?

How should I go about telling them? In my information packet?

I'm applying to my local ANG FW first, do you think they might be bit more forgiving?

Thanks to all that reply...

JRD

[Guest r6pilot]

If you get a chance to explain it, I think that could only help you. That's quite courageous to put yourself under that kind of debt/stress right out of college.

It'll definitely make a good answer for the "what have you done in the past and learned from?" question.

Good luck.

[Guest EverettP]

I don't know much about the route you're going but I do know once you hit your TS clearance investigation you probably should have it taken care of. State of finances is a big thing that they look at.

[Guest CAVEMAN]

And what gives you the authority on this issue?

It is a leverage issue not soo much as focusing on your academics. What about folks that are well into their careers, are they in flight school? Offcourse the Squadron wants to know that you are eligible for a TS. Investigations are expensive, finding out half way through flight school is bad for everyone.

[Guest Cmaw50]

As of now I have a 4.0 With two semesters left before I earn my Business degree. The problem is someone opened up a credit card under my name and maxed it out. The real kicker is that I had now clue until I looked at my credit report and saw that there had been no payment for six months on an account. I have tried to dispute the report, but nothing has been taken off yet, so in the mean time I have been working to pay it off to raise my credit. How will this affect my chances of earning a pilot slot? Should I wait to apply until I raise my credit?

[Toro]

As of now I have a 4.0 With two semesters left before I earn my Business degree. The problem is someone opened up a credit card under my name and maxed it out. The real kicker is that I had now clue until I looked at my credit report and saw that there had been no payment for six months on an account. I have tried to dispute the report, but nothing has been taken off yet, so in the mean time I have been working to pay it off to raise my credit. How will this affect my chances of earning a pilot slot? Should I wait to apply until I raise my credit?

This wouldn't affect your chances at a pilot slot, it would affect your security clearance; any sort of financial problem (credit problems, bankruptcy, foreclosure, etc) are red flags. If the charge truly is not yours, I would get more aggresive with your situation (get the authorities involved - credit fraud is a CRIME) and don't sweat the pilot slot thing. Even if the situation was still pending when it came time to submit your security clearance, you can always explain it.

[Guest Cmaw50]

This wouldn't affect your chances at a pilot slot, it would affect your security clearance; any sort of financial problem (credit problems, bankruptcy, foreclosure, etc) are red flags. If the charge truly is not yours, I would get more aggresive with your situation (get the authorities involved - credit fraud is a CRIME) and don't sweat the pilot slot thing. Even if the situation was still pending when it came time to submit your security clearance, you can always explain it.

Thanks for the quick reply! I have already started a case with my local police department, and it is pending. If it is not resolved is it a sure thing that I will not be cleared for a security clearence? Im think that it will be cleared up soon.

[Toro]

If it is not resolved is it a sure thing that I will not be cleared for a security clearence?

No, you should be okay. As long as you have some sort of documentation that you're having the authorities look into the matter as credit fraud, I don't think they're going to raise a big stink.

[Guest Bender]

It's not a sure thing and, quite frankly, small beans compared to some other problems I've seen come up (active bench warrants, opps.) You'll just have to resolve it one way or the other. It's a serious issue if the the way you keep your credit reflects on you as a person. It shows your trustworthiness and willingness to follow rules. Additionally, being in debt, while not showing a willingness to work it off makes you a prime target for bribery and espionage.

Look at it this way, if you had an active warrent out for your arrest...they would simply want it resolved before they'd finish it. This is assuming you could clear it up in the time giving to respond to their Statement of Reasons to you that not only were not giving you this clearance, but yanking your other ones. I think they give you 60 days at that point to resolve the issues, respond with your "Here's why that happened, I'm not a dirtbag," and give them proof it's all straightened out.

I'd say it's best to get a leg up on resolving any issues early...It makes for a stressful 60 days otherwise.

BENDY

[pawnman]

I don't know much about the route you're going but I do know once you hit your TS clearance investigation you probably should have it taken care of. State of finances is a big thing that they look at.

On the other hand, if you can show it's under control and you're actively managing it, it won't be a problem. They look at it for TS clearances because they want to know if your financial lack of health is a potential lever for an adversary to use against you. Be honest, up front, and tell them how you're fixing the problem, and it shouldn't be an issue. Look at the investigator all wild-eyed and scream "I'm on the brink of bankruptcy! Oh God, what am I going to do!?", and you're probably not going to get that clearance.

[Guest C5Heavy]

Couple of things not to do:

1. Don't go on a credit card cancelling spree. This will bring your available credit and account age down.

2. Be ready to explain derogatories if needed

3. If you have agreements for payments, be prepared to show papers

What you can do is get all your report and scores from FICO directly, don't trust credit monitoring companies that supposedly give you free unlimited access to your score and report, since their scores are not actual FICO's but a mere estimate. I have seen people buying those services for $15/month thinking it's a good deal only to see them nearly passing out when they see their actual score which they swear were at least 50+ higher on every bureau.

Also do NOT fall prey to the 'credit repair bureaus; there is nothing that you cant do on your own, including sending out goodwill letters to companies to ask them to remove X,Y or Z. I know it's easy to panic and look for a fast easy way to get that late payment off etc.

Everyone at one point in their lives (yes even the wealthy) has encountered some form of credit problems. The thing is to learn from it and work to correct it to the best of your abilities.

[Guest monkey]

Hello,

I was selected for a pilot slot with a reserve unit and am currently awaiting results from this month's AFRC board.

Even if I make it, I am very concerned about passing the security clearance. I don't have any drug background/moving violations/criminal record, but I do have terrible credit.

I went to a private college and financed it 100% with loans. I was young and ignorant, and it is the biggest regret of my life but I've come to terms with the fact that I simply have to live with this and do the best I can.

The loan amount itself is huge (I'm too embarrassed to even admit how much) but the bigger problem is my [past] delinquency.

During my first few years out of college, I barely earned enough to cover my bills due to my very low starting pay. So I always picked up extra work to make ends meet.. and this way, I was able to always pay my bills on time.

Then recession hit, and the extra work was no longer available and I couldn't work extra even though I was dying to. So, for a period of about a year I was late on my student loan payments.

I have loans through several banks, and at one point I was stretched thin enough to reach the default point (180 days late) on one of them. Needless to say, before I got to this point, I had tried countless times to work out payment plans with the bank but they flat out told me they would rather I end up defaulting than work out a temporary payment plan. I think this is because they know private loans aren't dischargeable through bankruptcy so they had zero incentive to help me. Anyway, so I defaulted on one of my loans.

The next year, I got a promotion and my pay went up to livable standards. I seriously worked my butt off, and was able to bring all my loans current (owed like 7k in late payments and paid it off in a month) except for the defaulted one because a defaulted private loan will always be in default status until it's completely paid off, even if you're making payments on it. Theyre not like federal loans that can be rehabilitated even after default.

That was a year ago and since then I have been paying my loans every month, on time. For the defaulted one, I'm on an automatic payment plan with the collection agency.

While I still have the huge debt (it's like a mortgage and will take another 15 years to pay off) my payments are now manageable to me and I'm not living in hardship.

Does someone like me actually have a shot at obtaining the TS clearance necessary for my pilot slot? I know other guard/reserve pilots who have 6 figure student loans like I do, but they haven't been delinquent or defaulted like I have.

Also, I heard that the background check could take a long time. What happens if you get rejected for the TS while say for example you are halfway through UPT? You are already an officer at that point so do you get discharged?

[Guest lbzrider14]

I have a friend who works in the credit beaurea and sat down with them for a few hours when I graduated. Credit score is based on the following.

1) Debt to credit ratio - Accounts for 30% of FICO score - Say you have 2 credit cards each with a 5k limit. Say you have 2500 on each card, your debt to credit ratio is 50% = bad. Sadly enough, an easy fix for this is to call up and increase the line of credit for each card (but tell them you want to increse it as much as you can without having them do a credit check). If you have self control and can get these limits increased to 8k each, you've just dropped your debt to credit ratio 20% without doing anything.

2) Length of Credit History - Acounts for 20% of FICO score - How long you've had history. If your young and out of college, AND YOUR PARENTS HAVE GOOD CREDIT, have them add your name to their oldest credit card. Make sure this card has a low balace or it could work against you as mentioned in #1 above. If you only have 4 years of credit history, once your added to your parent's account you now have a 20 year credit history (or however long they've had the card).

3) Payment History Maybe 35% of FICO score - self explainatory. History of paying on time, missed payments, loan defaults, bankrupcies.

4) Types of history - This is minor maybe 10% of FICO score, but credit beaureas want to see variations in types of credit history; car loans, mortgages, retail loans. It gives them more rounded picture of how you handle every type of credit.

5) Recent New Credit applications - About 10% of FICO score. If you are always opening new accounts, moving around ballance, and always inquiring about new loans, credit card companies see this is as bad.

Sadly enough, they do not care how much you have in assets in savings or investment accounts.

[Learjetter]

Hello,

I was selected for a pilot slot with a reserve unit and am currently awaiting results from this month's AFRC board.

Even if I make it, I am very concerned about passing the security clearance. I don't have any drug background/moving violations/criminal record, but I do have terrible credit.

......long story about not paying off loans properly....Does someone like me actually have a shot at obtaining the TS clearance necessary for my pilot slot? I know other guard/reserve pilots who have 6 figure student loans like I do, but they haven't been delinquent or defaulted like I have.

Also, I heard that the background check could take a long time. What happens if you get rejected for the TS while say for example you are halfway through UPT? You are already an officer at that point so do you get discharged?

Good news and Bad News...and remember this is from some dude on a message board...but I think the info is generic enough to be accurate...others can weigh in as desired...

Good news: you do NOT need a TS to be a pilot in the USAF. You DO need a Secret clearance, however, to get commissioned as an officer (and presumably to attend/graduate from UPT).

Good news: you DO have a shot at getting both the S and TS

Good news: the more truthful you are on your applications the better it will go for you in the long run

Good news: If you're going to have something "wrong" with you on your security clearance paperwork, this is the kind of thing to have. Stuff that's BAD: Criminal record, untruthfulness

Bad News: It's never a good thing to be delinquent/in default on ANY loan--"too much" unexplainable/provable financial mismanagement will result in losing your security clearance, and possibly get you separated. Typically, if you're shown to have made a series of really poor decisions in financial matters, you open yourself to clearance denial since you have a HISTORY of repeated poor financial decisions and that makes you a security risk. For example, if, in your story you can PROVE (if asked) that you made ONLY enough money to pay rent/utils and make the odd student loan payment, you're probably OK. But if you bought two new cars, a flat screen TV, a new stereo, and got three new cell phones a year during the same time frame, that's a different kettle of fish. See the difference? One was you're doing your best to discharge your responsibilities and got a little behind (sts). The other is you don't care about your responsibilities and can't figure out what you're supposed to be doing.

Good news: Clearances take as long as they take. Normally, you start your secret paperwork before you commission...at some point in UPT (depending on anticipated unit of assignment), you'll fill out TS paperwork. TIP: Save a COPY of EVERY clearance form you EVER fill out (it makes follow-on paperwork/applications SO much easier!) Expect from submission to clearance date (for S, about 6 months, for TS, about 8-10 months).

Good luck.