Do you need a good credit score to get student loans? The answer depends on what type of student loan you’re borrowing with. Federal student loans don’t have credit requirements for students.
But if you’re turning to private lenders to finance your education, you’ll need to have your own good credit — or to find a student loan cosigner who does have good credit and is willing to apply with you.
Let’s explore what lenders look for in an application, including the kind of credit score they want to see before approving a private student loan.
What is a good credit score for student loans with a private lender?
When deciding whether your or your cosigner’s credit is good enough, you need to know how lenders will view different credit scores:
- Mid-600s or lower: Most private lenders won’t approve you for a student loan without a cosigner. You’ll need to rely on student loans options for bad credit, such as federal student loans or applying with a cosigner.
- Mid-600s to 690: You’ll find few lenders willing to work with you and your chances of qualifying on your own will be iffy. If you are approved, expect to pay expensive private student loan rates.
- 690 to 720: It will be faster and easier to find lenders willing to work with you. Your private student loan rates will typically be closer to the middle range of rates a lender offers, too.
- 720 and up: You’ll have your pick of the best private student loans out there, and you credit score will work in your favor. You’ll also get the lowest student loan rates.
Can you qualify for a private student loan?
Your credit score is a central factor that determines whether a lender will approve or deny your request for a private student loan. But these three digits aren’t the only thing that matter to lenders.
You’ll need more than a good credit score to qualify for a private student loan. Here’s what you need to do to see if you have a good credit score for student loans, and to understand how your credit impacts your private student loan applications.
Check your credit score
First off, you need to know exactly what your credit score is. College students might not know what their credit score is or whether it’s good enough to get a private student loan on their own.
Fortunately, there are a few options to check your credit score for free. Credit Karma and Credit Sesame are among the most popular.
Make sure you meet legal borrowing requirements
Lenders have to comply with many U.S. federal and state laws about how they can do business. On the legal end of things, most lenders set the following criteria for private student loans:
- Be a U.S. citizen or legal resident
- Be 18 years old or older
- Use student loans only for educational expenses
- Show that you’re enrolled at least half time in an educational program that qualifies
Some lenders will only extend private student loans to residents of certain U.S. states, or to enrollees at specific colleges. Before applying, check the lender’s requirements to be sure you meet them.
Consider your income and debt history
On top of a credit score, lenders also way some financial and employment criteria for private student loan borrowers. Private student loan lenders look at the following factors to try to gauge if you can afford to repay this debt:
- Credit history: Besides your credit score itself, lenders will look at your credit report for derogatory remarks, such as late payments, bankruptcy, and delinquent accounts. They’ll want to see a mix of credit accounts with histories of on-time payments.
- Employment and income: Not all students have a job. But if you’re a student who has one, it can improve your chances of approval. Most lenders will ask for proof of employment and income, such as a recent pay stub.
- Debt-to-income (DTI) ratio: Lenders also will compare your income to your monthly debt costs to make sure you can afford additional payments. They usually want to see a DTI of 28 percent or lower — use our calculator to estimate your own DTI. Many lenders will consider your housing costs (rent or mortgage) as well.
Request private student loan rate quotes
Each lender has its own credit score requirements for private student loans, which aren’t always advertised. The best way to know if you’ll qualify for a private student loan with a specific lender is to apply for a loan rate check.
Lenders usually can perform a soft credit check to generate a rate estimate, but some might not. So double-check whether it’s a soft or hard credit inquiry before you allow the lender to perform it. If it’s a soft inquiry, it won’t affect your credit score.
Once the lender figures out whether you qualify, it will list out all the rates it can offer you. Or, if you don’t qualify for a private student loan, you can find that out without a hard credit check that could lower your score.
Should you apply for a private student loan with a cosigner?
The reality is most college students can’t meet the credit score, income, or other borrowing criteria lenders set. But if you don’t have a good credit score for private student loans, that doesn’t mean they aren’t an option.
One solution is to apply for private student loans with a cosigner. By doing so, you can:
- Get the good credit of a parent or other cosigner
- More easily qualify for the loan
- Get better interest rates
About 90 percent of private student loans are borrowed with the help of a cosigner, according to a Consumer Financial Protection Bureau (CFPB) report.
Not only are cosigners common, but some lenders such as Ascent and CommonBond won’t accept private student loan applications without them. Other lenders allow borrowers to apply with a cosigner if they don’t meet credit and income qualifications on their own.
Don’t forget to find out if your lender offers a cosigner release and under what terms. Citizens Bank, for example, allows a primary borrower to release a cosigner after making 36 on-time monthly payments.
Do lenders view graduate students differently?
If you’re pursuing an advanced dedgree, you might have an easier time securing private student loans for grad school. That’s because, per the CFPB, “as a graduate or professional student, you might be more certain of your job prospects and earning potential.”
Graduate students also are more likely to have an employment history of high salaries, especially if they spent a few years working after completing their undergraduate degree. They tend to have longer credit histories as well, allowing lenders to get accurate insights into the applicant’s financial management.
Additionally, several lenders offer private student loans specifically to graduate students that carry different requirements. CommonBond, for instance, requires cosigners for both its general undergraduate and graduate student loans. However, it has no such requirement for its MBA student loans.
Many lenders offer student loans specifically for students in MBA, medical, dental, law, or other graduate programs that can lead to high-paying careers.
Bottom line: Good credit is required for private student loans
It’s a smart idea to utilize federal student loans first, as they don’t have a credit requirement. But private student loans can be an important tool to fill in gaps in college costs. You or a cosigner must have a good credit score to get student loans from a private lender.
If you need student loans now, enlisting a cosigner is the way to go. But it’s never too early to start building credit and improve your chances of qualifying for student loans in the future.
Need a student loan?Here are our top student loan lenders of 2019!
|2 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1)All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7% variable Annual Percentage Rate (“APR”): 96 monthly payments of $179.28 while in the repayment period, for a total amount of payments of $17,211.20. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.
Information advertised valid as of 5/22/2019. Variable interest rates may increase after consummation.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
3 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
4 Important Disclosures for Discover.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.99% – 11.32%2||Undergraduate, Graduate, and Parents|
|4.50% – 11.35%*,3||Undergraduate and Graduate|
|4.84% – 13.49%4||Undergraduate and Graduate|
|4.25% – 11.30%5||Undergraduate and Graduate|
|4.50% – 9.47%6||Undergraduate and Graduate|
|3.74% – 9.72%7||Undergraduate, Graduate, and Parents|
|4.45% – 12.32%8||Undergraduate, Graduate, and Parents|