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When you apply for a loan, lenders will review your credit to determine your risk as a borrower. This also applies to certain types of student loans, including federal PLUS loans and private student loans.
If you’re wondering what credit rating you’ll need to qualify for these credit-based loans, here’s what you need to 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 the type of loan you choose as well as the individual lender (for private student loans).
Federal student loans
Minimum credit score required: No minimum for most federal loans (must not have an adverse credit history for PLUS loans)
Most federal student loans do not require a credit check, including subsidized and unsubsidized direct loans. To be eligible for these loans, you must:
- Be enrolled at least half-time in a degree or certificate awarding program
- Attend a school that participates in the federal financial aid program
- Have a demonstrable financial need (for subsidized loans)
However, you must submit to a credit check if you wish to take out a PLUS direct loan. There are two types of PLUS loans: Grad PLUS loans for graduate and professional students and Parent PLUS loans for parents who want to cover their child’s education costs.
Unlike private student loans, you do not need to meet a minimum credit score requirement to qualify for a federal PLUS loan. Instead, you must not have an adverse credit history. If any of the following are included in your credit report, your credit will be considered adverse:
- An overdue balance greater than $2,085 that has been past due for 90 days or more, has been placed in collection, or has been written off within the last two years
- A default, discharge from bankruptcy, repossession, foreclosure, wage garnishment, tax lien, or federal student aid debt write-off within the past five years
Keep in mind that if you have a bad credit history, there are two ways to get a PLUS loan. You must either reapply with an endorser who does not have an adverse credit history (similar to a co-signer) or provide documentation illustrating any extenuating circumstances related to your adverse credit history.
Private student loans
Minimum credit score required: Typically 670 or more (depending on the lender)
You will generally need good to excellent credit to qualify for a private student loan. This usually means having a credit score of 670 or higher, although the exact credit score you’ll need to be approved depends 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 score lower than this or haven’t yet established a sufficient credit history, applying with a co-signer who has good to excellent credit could increase your chances of approval. Even if you don’t need a co-signer to qualify, having one could get you a lower interest rate than you would get yourself. Just keep in mind that your co-signer will share responsibility for the loan, which means they will be liable if you don’t make your payments.
Also note that some lenders offer student loans for bad credit, but these loans usually come with higher interest rates than 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 time improving your credit to qualify more easily in the future. It 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 for building your credit, such as:
- Make payments on time. Your payment history is one of the main factors that determine your credit score. Be sure to pay all your bills on time to build a positive payment history and potentially improve your score over time.
- Repayment of credit card balances. Another major component of your credit score is your use of credit. This is the amount you owe on revolving lines of credit (such as credit cards and lines of credit) compared to your total credit limits. Consider paying down your credit card balances and keeping your credit utilization rate below 30% to potentially boost your credit score.
- Become an authorized user on a credit card. If you know someone with good credit (like 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 good financial habits of the primary cardholder without you even having to use the card itself.
- Avoid new loans when possible. When you apply for a new loan, the lender will perform a thorough credit check to determine your eligibility. This could cause your credit score to drop slightly. Although your score will likely rebound within a few months, it’s a good idea to avoid applying for new credit unless absolutely necessary to avoid damaging your credit score.
Can you get a student loan with no credit history?
Yes, you might still be able to get a student loan with no credit history. Most federal student loans don’t require a credit check, and you may qualify for a private student loan with the help of a creditworthy co-signer.
There are also private lenders who work with poor or no credit borrowers. For example, Ascent offers loans to juniors and seniors with no credit history, and AM Money considers your GPA instead of your credit to determine eligibility. These two loan options also do not require a co-signer. However, they also generally charge higher interest rates than good credit loans.
You can also consider applying for a private student loan with a co-signer who has good to excellent credit, which could help you get approved. Remember that if you don’t make your payments, your co-signer will be responsible.
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