Most federal student loans don’t require you to have good credit. However, private lenders do have certain minimum FICO credit score requirements. Other private lenders are willing to look beyond your credit score to your future earning potential, or they’ll let you qualify with a cosigner.
If you’re applying for student loans, you may be wondering what the student loan credit score requirements are.
There’s some good news for would-be student loan borrowers. When you apply for federal student loans, your FICO score isn’t typically a factor. The only time an adverse credit history can prevent you from qualifying for a federal student loan is when you’re a parent or grad student applying for a PLUS loan.
Different lenders have different minimum requirements, but this guide will help you determine the score you need as well as provide some tips on steps you can take to find the best student loan lender for your particular situation.
In this guide:
- No Credit Score Needed for Federal Student Loans
- You’ll Probably Need a Good Credit Score for Private Student Loans
- Don’t Have Good Enough Credit? Get a Cosigner
- Credit Score Needed to Refinance Student Loans
- Other Factors lenders Consider
No Credit Score Needed for Federal Student Loans
For most federal Direct Loans, your credit isn’t checked, your credit history doesn’t matter, and your credit score is not a factor. However, federal PLUS Loans have different rules, and you can’t qualify with an adverse credit history. Still, these loans may be easier to qualify for than many private student loans if you have less-than-perfect credit.
Every student looking for school funding should exhaust federal student loan options first, so it’s good news that your credit isn’t a factor for most of these loans. Borrowing as much as you can from the Department of Education makes sense because federal loans have low fixed interest rates, low origination fees, strong borrower protections, and flexible repayment plans.
To get started applying for federal student loans, you simply need to fill out your Free Application for Federal Student Aid (FAFSA). The funding you can qualify for will vary depending on the school you’re attending and whether you can demonstrate financial need.
You’ll Probably Need a Good Credit Score for Private Student Loans
You will need to have a good credit score if you want to qualify for private student loans. While requirements vary by lender, a score above 700 is ideal to qualify with most lenders and to get the most competitive rates.
If your credit is between 650 and 700, you may still be able to qualify for private loans with some lenders. However, you’re likely to be charged a much higher interest rate because you present a greater risk to the lender.
>> Read More: Student Loans for Bad Credit
If your credit score is below 650, you will probably have a difficult time qualifying for student loans without a cosigner.
To give you an idea of the minimum credit score you may need to get approved:
- College Ave student loans require a minimum 680 credit score.
- Ascent student loans require a minimum 600 credit score for student borrowers with cosigners, but cosigners need a minimum 660 credit score. Student borrowers with no cosigner need a score of 680 or higher.
- Discover student loans require a minimum 660 credit score.
Don’t Have Good Enough Credit? Get a Cosigner
If you are just starting college and you have no credit to speak of, or your credit score is too low to qualify for private student loans on your own, you aren’t alone. Many students find themselves facing exactly this situation. That’s why most private student loan lenders allow borrowers to apply with a cosigner.
Cosigners agree to sign for the debt with the primary borrower. They take full legal responsibility for paying back the debt, even though the expectation is that the primary borrower will repay it on their own.
The cosigned loan is reflected in the cosigner’s credit report, so if the primary borrower is late with student loan payments, this would hurt the cosigner’s credit score. The lender could also try to recover unpaid funds from the cosigner if the primary borrower defaults.
Cosigners take on a huge responsibility, but the good thing is that many student loans have cosigner release options. Cosigner release allows the cosigner to be released from responsibility for the debt if the primary borrower makes a certain number of on-time payments.
>> Read More: How to Get a Student Loan Cosigner Release
Credit Score Needed to Refinance Student Loans
If you already have student loans, you may decide you want to take out arefinance student loan to pay them off. This would give you a new loan to pay with different repayment terms and ideally a lower interest rate. If you pay off all your existing loans with a refinance loan, you’d also simplify the repayment process by having to make just one monthly payment.
Typically, you need good or excellent credit to qualify for a refinance loan. Even if you could qualify with low credit, it probably wouldn’t make sense to do so because bad credit loans often have higher interest rates and the goal of refinancing is to reduce your rate.
The specific credit score you’d need would also vary by lender in this situation. For example, to qualify to refinance with SoFi or ELFI, you’d likely need a minimum credit score of 680 or higher, and to qualify to refinance with Earnest, you’d need a score of at least 650.
Cosigners can help in this situation, too—if you’re able to find someone to cosign for you.
Other Factors lenders Consider
While your credit score is undeniably an important factor that lenders use when determining if you qualify for a private student loan, it is not the only factor. Lenders also look at other things including:
- Your debt-to-income ratio: This is the ratio of debt payments vs monthly income.
- Your employment history: A stable history of employment for at least 6 months to a year is preferred.
- Your income: More income is better than less.
- The mix of credit you have: It’s good to show a responsible payment history with different kinds of debt, including revolving credit (such as credit card debt) and installment loans (such as auto loan debt).
- The degree you’re pursuing: This is especially important for grad students.
- Future earning potential: As with the degree you’re pursuing, this serves as an indicator of your ability to repay loans in the future.
How Students Can Check Their Credit Reports for Free
If you’re not sure if you have a good credit history—or much of a credit history at all—you can check your report and score for free. You just need to contact one or each of the major credit bureaus—Experian, Equifax, and TransUnion—and ask for your report. Alternatively, you can visit AnnualCreditReport.com to check your score for free.
Bottom Line: Good Credit is Needed for Student Loans, But Other Options Exist
You’ll need good credit to qualify for a private student loan on your own. However, if you have a limited credit history, you do have some other options. You can get most federal student loans even if your credit is not perfect, and you can also qualify for student loans with a lower credit score as long as you have a cosigner. Just be sure to look into all the options available to you so you can get the funding you need at the most affordable rate.
Author: Christy Rakoczy
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