Shopping for a student loan
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For students, who are often first-time borrowers, loan shopping is "a really confusing process," says Berkley. "It's confusing for students, and it's confusing for parents."

Steps to minimize credit damage
There are at least nine steps students and parents can take to make smarter loan choices and minimize the impact on those credit scores:

1. Max out all of your options for federally backed loans before you even consider private loans. Federally backed loans don't require a credit check (everyone gets the same rate, regardless of credit), so they won't depress your score. Plus, the terms, fees, and repayment options are generally better.

2. Talk to your college. Your financial aid office can tell you which private lenders other students are using most, and the types of rates and fees they are seeing. They may even be able to tell you about the terms and fees on the loans they've seen. Some schools even have affinity programs with lenders, which can give students a better rate, says Kalman Chany, co-author of "Paying for College Without Going Broke."

Students are sometimes reluctant to use the aid office to their full advantage. And some parents may be wary because, in the past, some lenders and colleges were chastised for being too chummy. But, if you keep your eyes open and do your own research, colleges can be a great source of information you might not get anywhere else. While you're at it, find out if your college lends money (some do), says Chany.

3. Don't let deadlines push you into private loans. You can obtain federal money as fast as (or faster than) you can get private money, says Chany. File your federal aid application (the Free Application for Federal Student Aid, or FAFSA), online and "and in as quickly as two days, the school can have your results," he says.

4. Investigate state and local money. Some states have financial aid agencies that lend college tuition money, says Mark Kantrowitz, publisher of FinAid.org. While there are fewer of these than a few years ago, it's worth finding out if it's an option for you.

5. Hit the Web. Sites like FinAid.org will help you research the range of rates that lenders are charging, along with some of the fees and terms. Use this information to narrow your list of lenders before you start making applications.

And be careful about making assumptions based on best rate/worst rate information, says Kantrowitz. "Less than 10 percent of borrowers get the best rate," he says. "Two-thirds or more get the worst rate."

6. Pull your credit history. Get a (free) copy of your credit report, and pay to get your credit score, too, says Daniel T. Barkowitz, director of student financial aid and employment at MIT. If your parents will be co-signing, have them do the same. When you talk with lenders, advise them of the credit scores, and ask what kind of rates and terms they can offer. Just how open and precise are they willing to be?

7. Check on the financial health of your lender. Worst-case scenario: You shop around, find a great rate and the company goes under or stops making new loans, says Chany. Now you have to take your history and your score (which could be lower thanks to the first round of shopping), to a new lender, and you might not get as good a rate. Check your bank's rating first.

8. Research the loan before you apply. Since many of the same lenders broker both public and private money, it can be confusing to borrowers, says Chany. "A lot of people went for private loans thinking they were getting federal loans," he says.

Before you apply you need to know: What is the loan? How much will you receive? Who is the lender? What is its reputation? Is the loan private or government-backed? What is the range of rates? If the rate is variable, how is it calculated? Is there a cap on the rate? What are the fees? What are the repayment terms?

9. Shop carefully. After you narrow your list, limit the number of applications you file. Advice from advocates and loan consultants varies, but the general rule of thumb is to keep your applications to three or no more than four. Keep those applications within a two-week period. (Kantrowitz even recommends keeping them within one week.) That way, if the bureau bundles them for the purpose of calculating your score, they'll count as one. And if it doesn't, since the inquiries won't be rolled into your FICO score for a month, you'll have a couple of weeks to make your decision before your score is affected.

And while the inquiries will be dropped from your credit report in two years, they will affect your FICO score for only one year. That means that when you apply for a loan next year, you should have a clean slate.