Traditional credit scores are required by lenders to get auto loans, personal loans, mortgages and other kinds of financing. But do good credit scores matter to get a student loan?
It depends on what kind of student loan you’re applying for. If you’re looking for federal loans, then a good credit score isn’t required.
A borrower’s credit score has no effect to qualify for Perkins or Stafford loans. But for a Federal PLUS loan, which is applied by the parents of graduate or postgraduate or professional students, the applicant’s credit score isn’t factored, but the borrower can’t have a negative credit history, such as a 90 day bankruptcy or delinquency, according to FinAid.org.
Federal Direct Loans for most part have low interest rates and are easily accessible to anyone who needs them. They’re also almost impossible to be discharged via bankruptcy, though there is an option to restructure payments. In short, a borrower is obligated to student loans for life. This is why these loans are easy to get.
In addition, most college hopefuls don’t have much of a credit history. If the student’s credit history is factored to get a loan, then this would severely restrict students’ ability to pay for higher education.
Gerri Detweiler, director of consumer education at Credit.com said that a lack of a credit score shouldn’t prevent anyone from applying for student loans. If a borrower doesn’t default on another federal student loan, then credit score isn’t taken into account to get approved for federal student loans, Gerri said.
However, the scenario is different when it comes to private lenders. Though students are just as bound to private loans as they are to federal ones, some or most private lenders do look into the borrower’s credit scores for approving student loans, and borrower’s will have a hard time to get one if their FICO credit scores is less than 650, as per FinAid.org.
Most college education financing experts advise students to choose federal loans over private ones, as repayment schedules for federal loans are more flexible. But if you thinking about private loans to finance your college education, then you’ll need to check your credit scores, and there tools that you can use t do that for free.
Even if you don’t want a private student loan, the Department of Education still may want a little bit of credit history for Federal PLUS loans. Any negative points will be easy to spot on a credit report and consumers can get their free annual credit report from all three major credit bureaus.