Student loans are the one corner of consumer finance where your credit score doesn’t always dictate your ability to borrow, especially if you take out federal student loans. However, private student loan lenders typically require you to have a credit score of at least 670. The higher your number, the lower your interest rate.
Read on to learn more about how your credit score affects your chances at qualifying for a student loan.
How do I apply for a student loan?
The process of applying for student loans is similar across lenders, though it’s slightly different depending on whether you’re applying for federal or private loans.
Applying for federal student loans
Eligibility for federal student loans is pretty straightforward: You must be a U.S. citizen and enrolled at an approved institution. With that said, the federal government imposes limits on how much students can borrow. For “dependent” students — those who still rely financially on their parents — the limit is $5,500 to $7,500 a year and $31,000 cumulatively. For independent students, including graduate students, the annual limits are higher, and the cumulative limit is $57,500 for undergraduate students and $138,500 for graduate students.
To land a federal loan, you’ll need to follow these simple steps:
- Fill out the Free Application for Federal Student Aid (FAFSA). The FAFSA is a form that determines whether you qualify for financial aid from the government and most colleges, and you’ll need to fill it out and submit it before the school session starts. The form opens up on Oct. 1 each year.
- Go over your offers. The Department of Education will send you a report that explains your eligibility for federal student aid, which may include a combination of student loans, grants and scholarships. Your offers may vary with each school.
- Accept the financial aid. Once you decide where you’ll attend school, contact it to accept your financial aid. Set a reminder for next year, too — you’ll need to submit a new FAFSA form for each school year.
Applying for private student loans
If your financial needs exceed federal aid limits, then private student loans can help you fill in the gaps. Here’s what the process looks like if you need to apply for private student loans:
- Determine how much you need to borrow. To calculate this number, subtract your expected federal financial aid from the cost of attending school. Private student loans might be able to pay for what’s left over. But because private student loans may come with higher interest rates, more fees, and fewer borrower protections compared to federal loans, it’s a good idea to borrow only what you need.
- Compare loan options. Next, research private student loan lenders and what they offer. Compare loan amounts, interest rates, fees, hardship programs and payment plans, and check whether you’ll need a co-signer on your loan.
- Apply for the loan. Once you choose a lender, submit an application and provide any documentation that’s required. The lender will likely do a hard credit check when processing your application.
- Receive the money. If you’re approved, the lender will either disburse the money directly to your school or send it to your bank account.
Student loan credit score requirements
Every lender sets its own qualification requirements — so if you don’t fit the credit profile for one lender, you can always try submitting an application with another. You can also ask a creditworthy parent or another relative to co-sign the student loan with you.
Below is a sampling of credit score requirements for lenders that advertise them:
|Lender||Minimum credit score|
|Education Loan Finance||680|
Federal student loans: No credit requirements
Borrowers don’t need any credit history to get most federal student loans. That makes sense: Many people entering college have yet to establish credit histories, so if the federal government were to begin scrutinizing borrowers’ creditworthiness, the student loan system would grind to a halt. “Oftentimes the student has a thin or nonexistent credit history,” says student loan expert Mark Kantrowitz. “Or if they have a credit history, it’s usually a bad one.”
If you’re a borrower, let this lack of scrutiny serve as a yellow light: You can borrow tens or even hundreds of thousands of dollars over the course of your college career, but you’ll have to pay it all back with interest.
The exception to the rule is federal PLUS loans — with these, you will have to go through a credit check, although there is no minimum credit score requirement.
Private student loans: Good to excellent credit
To secure a private loan, you’ll typically need a score of at least 670 or a co-signer (typically a parent) with a score in that range. However, knowing the precise cutoff is tricky, because private lenders consider their credit-score guidelines a trade secret.
The only way to find out if you qualify is to apply. Most student loans go to borrowers with good to excellent credit. According to the Consumer Financial Protection Bureau, more than 57 percent of student loans made in 2018 (the latest year available) were issued to borrowers with credit scores of 660 or higher.
Some lenders offer prequalification, which allows you to see if you are eligible for a student loan without the lender pulling a hard check on your credit. Take advantage of these offers as much as possible when shopping around with private lenders.
Refinancing student loans: Good to excellent credit
If you’re out of college and paying down your student loans, you might benefit from refinancing. This process can let you consolidate multiple loans, lower your interest rate and shorten or lengthen the term of your loans. If you’re refinancing private loans with a private lender, you will need to pass a credit check, and the requirements are generally the same as with new student loans. “With anything under 620, you’re not very likely to qualify for a refinance unless you have a creditworthy co-signer,” Kantrowitz says.
Can you get a student loan with bad credit?
Most federal loans (with the exception of PLUS loans) are made without credit checks, so a spotty credit history poses no obstacle. However, if you’re applying for private loans, your credit score will come into play.
If you have bad credit, recruit a parent as a co-signer. In this scenario, the lender will evaluate your co-signer’s credit history in addition to your own, potentially reducing your interest rate. The downside is that the co-signer takes on partial responsibility for the loan, meaning their credit may take a hit if you fail to make payments.
If you have a credit score in the mid-600s or below, take a look at your options with lenders that offer prequalification or recruit a co-signer.
How do I check my credit score?
Knowing your credit score is key to knowing which types of loans you might be eligible for. One of the simplest ways to check your credit score is to purchase it from Equifax, Experian or TransUnion, or from FICO itself.
But there are also free ways to see your score. Many banks and credit card issuers give you free monthly updates of your credit score, as do companies like Intuit — creator of TurboTax and Mint.
Find the right loan for you
There are many benefits to federal student loans, including historically low interest rates, repayment flexibility and borrower protections. And if you don’t have any credit history, your best chance at qualifying for financial aid may be with a federal student loan.
If you’ve tapped the limits of federal loans, shop around for the best rates on private student loans — with the caveat that the credit score of you or your co-signer will determine the rate you pay.