Will a Short Sale Affect My Security Clearance?

The housing market in the United States has a history of fluctuating. Over the past decade, we have seen mortgage rates hit an all-time low. This strategy was implemented to enable consumers to purchase homes at low rates in hopes that it would increase one’s discretionary income. People would then be able to spend their discretionary income on other things besides a mortgage, stimulating the economy.  Although good efforts (such as this) were put forth, many homeowners are still finding themselves in housing turmoil because of the failing economy. Many factors contribute to the state of our current economy such as lack or loss of jobs and issues with the financial industry. These and other factors have forced many hard-working individuals into foreclosure or a short sale of their home. For those who work for the federal government, this can be a factor of their ability to obtain or retain a security clearance, and thus, their job. A security clearance allows certain individuals to have access to classified government information. Many steps have to be taken in order to obtain a security clearance. These include, but are not limited to, interviews with family members regarding one’s personal history, a background investigation, and last but not least, a review of one’s credit report. A person’s credit report provides a snapshot of their current financial status, as well as a review of their credit history (financial behavior over time). You may wonder how one’s credit history relates to their eligibility to be issued a security clearance. When reviewed, a credit history tells many things about a person. It allows the reviewer to not only see if the person is able to make wise financial decisions over different periods of time, but also gives insight to their behaviors and judgment. It allows the government to predict if the person is trustworthy and able to withstand potential bribes for classified information, and therefore if they are able to do the job effectively and securely. A short sale occurs when the homeowner is unable to pay the full amount owed on the house, so the bank agrees to accept less than full value of the home, thus releasing the homeowner from the debt obligation. This is considered a negative event on the credit report of the homeowner, and subsequently has a negative impact on their credit history. Although a short sale does result in a negative credit event on an individual’s credit report, and a lower credit score, it should not influence one’s eligibility or ability to obtain a security clearance. This is based on a couple of factors. If the short sale is the only, or one of few, negative events listed in the credit history, the government knows that it is an exception to an otherwise positive credit history, and most likely due to unforeseen or uncontrollable circumstances. If this is the case, it shows that the person can in fact be trusted to make sound and important decisions and judgments. On the other hand, if the short sale is one of many negative events in an individual’s credit history, a more thorough investigation will be done to determine if that person is qualified to obtain a security clearance. Keep in mind; although they both negatively affect one’s credit report, a short sale is viewed more favorably than a foreclosure. A foreclosure is seen as the borrower giving up on their responsibility, despite the circumstance in which it unfolded. This creates the picture of an individual who is irresponsible and unable to make good decisions. A short sale is viewed as an attempt to help the bank (or lien-holder) to occur as minimal of a loss as possible, and is seen more positively by business professionals. Protecting your security clearance, and thus your job, is very important. If you find yourself in the position of pursing a short sale, it is important to discuss it with your supervisor. They will be able to provide direction as to what may occur if you decide to go that route, and what, if any, effects it may have on your career.