Obtaining a student loan with bad credit can often be challenging, but it is possible. If you have bad credit, federal student loans are a great place to start. With the exception of federal Direct PLUS loans, student loans provided by the federal government such as the Direct Subsidized loan and the Direct Unsubsidized loan, do not involve a credit check.

A good credit score, however, is often necessary when applying for private student loans, which are provided by banks, credit unions and online lenders. Most private lenders require a minimum credit score in the mid-600s. Even with private lenders, bad credit doesn’t have to rule you out entirely.

Options for student loans with bad credit

When you’re shopping for educational loans, any options you review will fit into one of two categories: federal student loans or private student loans. As a borrower with bad credit, you’ll encounter different benefits and drawbacks with each loan type.

Federal student loans

Federal student loans are a form of education financing that’s funded through the U.S. Department of Education. You can use the proceeds from federal student loans to help cover expenses such as:

  • Tuition.
  • Fees.
  • Books.
  • Supplies and equipment.
  • Room and board.
  • Transportation.

If you have credit problems, federal student loans are typically the best place to start. Most federal student loans do not require a credit check to qualify for financing.

PLUS loans are the one exception; these loans involve a credit check. However, they’re only looking for an adverse credit history. There are no minimum credit score requirements.

Credit score required: Federal student loans do not require a credit check for approval. Bad credit will not prevent you from obtaining a federal loan.

Private student loans

Private student loans are education financing offered by private lenders such as online lenders, banks and credit unions.  Some colleges and universities may also offer private student loans.

With a private student loan, the lender will almost always check your credit as part of the application review process. When you have bad credit, securing a private student loan may be a challenge. Bad credit can also impact the interest rate and loan terms you’re offered, making it more expensive to borrow if you qualify.

Many private student loan lenders require a minimum score in the mid-to-high 600s to qualify for financing. However, the lender may allow you to apply for a private student loan with a co-signer if you need help qualifying.  Just keep in mind that co-signing for student loans comes with drawbacks, such as the risk of credit score damage for your loved one.

If you’re considering a private student loan for bad credit, do your research and compare offers from multiple lenders to ensure you get the best interest rate and loan terms possible.

Credit score required: In most cases, you will need a credit score in the mid-to-high 600s to qualify. However, you may be able to qualify with the help of a co-signer.

How to improve your credit before applying for a private student loan

Because your credit plays a key role in the approval process, it’s wise to make sure that your credit score is in the best shape possible before applying for a new private student loan. Better credit may improve your approval odds and help you secure better rates and terms when you borrow money.

Here are four steps you can take if you want to improve your credit.

  1. Check your three credit reports. As you review your credit reports, make a list of any information that seems inaccurate and any negative items you need to address. You can claim a free copy of each of your three credit reports weekly at AnnualCreditReport.com.
  2. Dispute credit errors. Millions of Americans have errors on their credit reports. Some credit reporting mistakes have the potential to damage your credit score. If you discover errors on your credit report, it’s wise to dispute them right away.
  3. Lower your credit card utilization. A high balance-to-limit ratio on your credit cards can be bad for your credit score, even if you make your payments on time. You can lower your credit utilization rate (and likely save money in interest) by paying down your credit card balances. A credit limit increase is another out-of-the-box way that could help you to lower your credit utilization if you can’t afford to pay off all of your balances at once.
  4. Establish positive credit. If your credit file is thin, adding some new positive accounts to it might benefit you over time. Keep in mind that you may want to start with accounts you’re likely to qualify for despite having bad credit or no credit. Secured credit cards or credit builder loans may be worth considering here.

Can you get a student loan with bad credit and no co-signer?

If you have bad credit and no co-signer, likely one of your only options is federal student loans. If you’ve lost federal loan eligibility or you’ve exhausted your allotment, your borrowing options are limited.

However, some private lenders specialize in working with college students who have no credit history or no co-signer. Potential options include:

As with other student loan options, it’s important to shop around and compare offers from multiple lenders before deciding on one.

What to do if you can’t qualify for a student loan

If you’re having difficulty finding student loans because of bad credit, all is not lost. Here are some alternatives to consider.

Income-share agreements

An income-share agreement (ISA) is a student loan alternative that doesn’t require a credit check. Instead of loaning you money based on your credit history, providers will give you funding in exchange for a fixed percentage of your future income — usually between 2 percent and 10 percent — for anywhere between two and 10 years once you start working.

Depending on the agreement and your career results, you may end up paying more or less than the amount you received. This means that you carry some risk, especially if you end up with a high-paying job.

ISAs, which are often offered by colleges and universities, typically set a salary floor, which is what your income must be for payments to come due, as well as a payment cap, which is the maximum amount you have to pay.

If you’re considering an ISA, be sure to read the fine print and compare the terms to similar options to determine if it’s a good fit for you.

Seek other ways to pay for school

As a rule, it’s best to consider student loans as a last resort for college financing. Take some time to research scholarship and grant opportunities at your school. You can also use scholarship search engines to comb through millions of scholarships and grants offered by private organizations.

If necessary, you may also consider taking some time to work to save up for your next academic year and plan to work part- or full-time while you attend college. This can be challenging with some degree programs, but it might be worth the effort.

Reduce your expenses

If you qualify for federal student loans but can’t get enough to meet your financial needs, it might be worth considering a less-expensive school. Community colleges can be a great place to knock out general courses before switching to a four-year university to complete your degree.

You can also look for other ways to cut costs, such as living at home or requesting other financial help from your family.

The bottom line

It’s entirely possible to get a student loan with bad credit.  Your best bet is to start with federal student loans. But if you need private student loans to help finance your education, bad credit could make borrowing money more difficult and more costly.

Take steps to improve your credit as much as possible before applying for financing, such as lowering your credit utilization ratio and disputing errors on your credit report. If you decide to accept an interest rate that you’re not thrilled about now, you can always refinance your student loans in the future.

Frequently asked questions

  • While there are no minimum credit score requirements for federal student loans, private student loan lenders typically require you to have a credit score of at least 670.
  • No, most federal student loans do not have credit score requirements. Therefore, the FAFSA application process does not include your credit information.
  • Not necessarily. For many federal student loans, the requirements include demonstrating financial need, being a U.S. citizen or eligible noncitizen and be enrolled in an eligible degree or certificate program. Even for federal student loans that are not based on financial need, such as the Direct Unsubsidized loan, there are still eligibility requirements that must be met. And for private student loans, there are often credit score requirements.