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.