How Your Credit Score Can Affect Your Student Loan

If you are applying for a student loan, you may be wondering what bearing your credit score will have on the lender’s decision. Unlike auto loans, mortgages, or other types of personal financing –which almost invariably depend on a good credit score – student loans are often handled differently. Whether your credit score will matter depends on what type of loan you apply for.

Generally, an applicant’s credit score has no effect on access to a federal student loan. Some lenders do require that the applicant has no negative credit history, but don’t require a good credit history, either. Federal loans are often low-interest loans, so that the students who need them are able to access them. College students don’t often have much of a credit history, so federal loans offer them a way to be able to pay for college.

However, private lenders are different. There are some private lenders who do not take credit scores into account when issuing student loans, but most do. A low credit score could make it difficult to get a private student loan, whether they primary applicant is the student or his or her parents.

Federal loans are usually a better choice than private ones when it comes to student loans. The payment terms of a federal loan can be more flexible, and the interest rate can be lower. However, if you do want or need to use a private lender, be sure to check your credit score to see whether there are actions you need to take first to get your credit into better shape before applying.

Keep in mind, too, that once you secure a student loan, it is a great way to build your credit history. Payment assistance options such as deferment do not affect your credit score negatively, so these are better options than late or missing payments. Being responsible with a student loan will result in having a much easier time getting financing in the future.

Being Aware of Credit Report Scams

There are a number of different scams used by con artists to get money from hardworking people looking for jobs or trying to repair their credit. Being aware that these exist is the first step in avoiding them; individuals should also be aware of how to manage their credit on their own, and what steps they can – and can’t – take to repair low credit scores or mistakes on their credit reports.

If you are working from home, a common scam is when an “employer” who posts a job online asks to see your credit report, requesting that you use a specific service that he or she claims is free but actually ends up costing you money. This isn’t a legitimate employer and you end up paying for a credit report unnecessarily.

Another type of “employment” credit report scam involves scammers asking you to submit personal items such as your Social Security number, your driver’s license, or utility bills. These items all contain personal information that scammers can use to access your current accounts or open new accounts in your name. Unless you have met an employer in person or completed a thorough background check on the company, do not supply these items.

Credit repair companies are not necessarily “scams,” but they sometimes come close. No one can magically clear your credit report of derogatory items, and there is no amount of money you can pay to have accurate information removed from your report. When you hire a credit repair company, you are always paying for something that you can do for free yourself.

If you believe that you have been the victim of a credit report scam, immediately obtain a copy of your credit report and check it for accounts or other items that are not of your doing. You should also report the scam to the proper authorities.