What Credit Score Is Required For A Student Loan? – Forbes Advisor

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When you apply for a loan, lenders will review your credit to determine how risky you are as a borrower. This also applies to some types of student loans, including federal PLUS loans and private student loans.

If you’re wondering what credit score you’ll need to qualify for these credit-based loans, here’s what you should know.

What Credit Score Is Required For A Student Loan?

The exact credit score you’ll need to get approved for a student loan depends on what kind of loan you choose as well as the individual lender (for private student loans).

Federal Student Loans

Minimum required credit score: No minimum for most federal loans (must not have an adverse credit history for PLUS loans)

Most federal student loans don’t require a credit check, including direct subsidized and unsubsidized loans. To be eligible for these loans, you must:

  • Be enrolled at least half time in a degree- or certificate-granting program
  • Attend a school that participates in the federal financial aid program
  • Have demonstrable financial need (for subsidized loans)

However, you must undergo a credit check if you want to take out a direct PLUS Loan. There are two types of PLUS loans available: Grad PLUS loans for graduate and professional students as well as parent PLUS loans for parents who want to cover their child’s education costs.

Unlike with private student loans, you don’t need to meet a minimum credit score requirement to be eligible for a federal PLUS loan. Instead, you must not have an adverse credit history. If one of the following is included in your credit report, your credit will be considered adverse:

  • An overdue balance above $2,085 that is 90 or more days delinquent, has been placed in collections or has been charged off in the last two years
  • A default, bankruptcy discharge, repossession, foreclosure, wage garnishment, tax lien or write-off of federal student aid debt in the last five years

Keep in mind that if you have an adverse credit history, there are two ways that you might still be able to get a PLUS Loan. You must either reapply with an endorser who doesn’t have an adverse credit history (similar to a co-signer), or you must provide documentation illustrating any extenuating circumstances related to your adverse credit history.

Private Student Loans

Minimum required credit score: Typically 670 or higher (depending on the lender)

You’ll generally need good to excellent credit to qualify for a private student loan. This usually means having a credit score of 670 or higher, though the exact credit score you’ll need to get approved will depend on the lender. For example, Education Loan Finance (ELFI) requires a score of at least 680 while Earnest accepts scores of at least 650.

If you have a lower score than this or haven’t yet built a sufficient credit history, applying with a co-signer who has good to excellent credit could increase your approval chances. Even if you don’t need a co-signer to qualify, having one could get you a lower interest rate than you’d get on your own. Just keep in mind that your co-signer will share responsibility for the loan, which means they’ll be on the hook if you don’t make your payments.

Also note that there are some lenders that offer student loans for bad credit, but these loans usually come with higher interest rates compared to good-credit loans.

How To Improve Your Credit Score To Get A Student Loan

If you can wait to take out a private student loan, consider spending some time on improving your credit to more easily qualify in the future. This can also help you get approved for more optimal interest rates—in general, the higher your credit score, the lower your rate will be.

There are several potential strategies to build your credit, such as:

  • Making on-time payments. Your payment history is one of the biggest factors that make up your credit score. Be sure to pay all of your bills on time to build a positive payment history and possibly improve your score over time.
  • Paying down credit card balances. Another major component of your credit score is your credit utilization. This is the amount you owe on revolving credit lines (such as credit cards and lines of credit) compared to your total credit limits. Consider paying down credit card balances and keeping your credit utilization ratio below 30% to potentially boost your credit score.
  • Becoming an authorized user on a credit card. If you know someone with good credit (such as a parent or another adult), consider asking if you can become an authorized user on their credit card account. As an authorized user, your credit can benefit from the primary cardholder’s good financial habits without you even needing to use the card itself.
  • Avoiding new loans when possible. When you apply for a new loan, the lender will perform a hard credit check to determine your eligibility. This could cause a slight drop in your credit score. While your score will likely bounce back within a few months, it’s a good idea to avoid applying for new credit unless absolutely necessary to prevent damage to your credit score.

Can You Get A Student Loan Without A Credit History?

Yes, you might still be able to get a student loan without a credit history. Most federal student loans don’t require a credit check, and you could qualify for a private student loan with the help of a creditworthy co-signer.

There are also some private lenders that work with poor- or no-credit borrowers. For example, Ascent offers loans to juniors and seniors without credit histories, and A.M. Money considers your grade point average instead of your credit to determine eligibility. Both of these loan options also don’t require a co-signer. However, they also usually charge higher interest rates compared to good-credit loans.

You could also consider applying for a private student loan with a co-signer who has good to excellent credit, which could help you get approved. Just remember that if you fail to make your payments, your co-signer will be liable.

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