If you have unpaid loans which are significantly overdue and/or in collection, you can expect to be denied enlistment until you resolve the problem. A history of bad credit could also affect your security clearance eligibility, which could make many military jobs unavailable to you.
Financial Eligibility Determinations
Some recruits will have to show that they will be able to meet their current financial obligations upon enlistment. This includes recruits who are married (or who have ever been married), recruits who require a dependency waiver, recruits with a history of collection accounts, bankruptcy, closed uncollected accounts or bad credit. In the Air Force, it also includes any recruit who is at least 23 years of age. In general, the services are attempting to ensure that the recruit can meet current financial obligations on military active duty pay. For example, the Air Force uses the "40 percent rule." Any recruit who's monthly consumer debts (not counting debts which can be deferred, such as student loans) exceeds 40 percent of his/her anticipated military pay is ineligible for enlistment.
The Navy policy examines total indeptness, rather than monthly payments. The Navy Recruiting Regulation States:
No person may be selected who has a history of bad checks (unless through bank error), repossessions, cancelled or suspended charge accounts, or indebtedness exceeding half the annual salary of the paygrade at which the person is being recruited. If indebtedness includes a long-term mortgage, total indebtedness must not exceed 2 ½ times the annual salary.
The Marines use the same Financial Eligibility Determination forms that the Navy uses. However, the Marines only do a Financial Eligibility Determination when the individual requires a Dependency Waiver. As part of the Dependency Waiver approval process, the applicant is interviewed by the Recruiting Commander (or his/her representative), who ensures, as part of the interview/review process that the recruit would be able to meet their current financial obligations on military pay.
Like the Marines, the Army only does a Financial Eligibility Determination when a Dependency Waiver is required.