Having good credit can give you access to more financial products at more favorable rates. This includes private student loans, for those going to school, and private loans for refinancing student loans after you graduate. In either case, good credit can lead to lower monthly payments and paying less interest overall.
And while, for example, a FICO score above 670 is often seen as good, a lot depends on what you need that score for. Here are some questions to consider as you evaluate your credit score:
- What is considered a good credit score?
- Student loans and your credit score: Why does it matter?
- How is your credit score determined?
- How do those student loans affect your credit score?
- How do you check — and improve — your credit score?
What’s considered a good credit score will vary depending on the lender and type of loan. However, in general, a score in the high 600s will put you in the “good” range. Once your scores are in the high 700s or 800s, you may be in the very good or excellent ranges — giving you an even bigger advantage.
Credit score ranges
Different types of credit scores can have different credit score ranges. However, the most recently released and commonly used generic scores (meaning, a score that many types of lenders can use) from FICO and VantageScore range from 300 to 850.
FICO also creates industry-specific credit scores for auto lenders and bank card issuers that have a 250 to 900 range. In either case, a higher score indicates that a person is less likely to miss a payment in the next two years, which is why it’s a better score.
Having a credit score within a certain range could put you in a bad, good or excellent category. Lenders and creditors can set their own definitions for what they consider good or bad, but there are some general ranges that can serve as guidelines:
- Bad credit: 300 to 579
- Fair credit: 580 to 669
- Good credit: 670 to 739
- Very good credit: 740 to 799
- Excellent credit: Over 800
For these generic scores, the best credit score you can have is an 850. However, you don’t necessarily need the highest score to get all the benefits. Creditors may start to give you their best rates and offers once you’re in the very good or excellent ranges.
Your credit scores can impact your student loan options when you’re applying for student loans, and your refinancing options when you’re repaying student loans.
Most students should start their search for student loans with federal student loans. With federal loans, there’s no income or credit score requirements, which can make it easier to get approved for a loan. You’ll also receive the same interest rate and loan amount regardless of your credit.
However, students who don’t qualify for federal student loans or need to borrow additional money may turn to private student loans. Private lenders will check your credit, and having good credit can help you qualify for a larger loan amount and lower interest rate.
After you leave school, having good credit can be important if you want to refinance your student loans. Refinancing can help save you money by letting you replace your current loans with a new, lower-rate loan. However, you may need good credit to qualify for a new loan at a low rate.
Credit scoring models are programs that analyze one of your credit reports from Equifax, Experian or TransUnion. These major consumer credit bureaus collect and store information about your financial history and public records, such as your history with credit cards, loans and whether you’ve declared bankruptcy.
Scoring models analyze this information to try and determine the likelihood that you’ll miss a payment on a credit account in the future. Each model may weigh information differently, and your credit reports can vary from one bureau to the next. As a result, you may receive a different score depending on when you check your credit, which scoring model is being used and which credit report the model analyzes.
The good news — many credit scoring models use similar factors to determine your score:
- Payment history: Whether you’ve previously paid bills on time or had late payments, defaults, collections or filed for bankruptcy can have a significant impact on your credit.
- Revolving account usage: Only using a small portion of your available credit on revolving accounts (such as credit cards) is best. The amount you use compared to your available credit is called your credit utilization ratio.
- Experience with different accounts: Having a mix of installment and revolving accounts (both open and closed) in your credit history can be good for your scores.
- Length of credit history: A long credit history, and high average age of accounts, could also be good for your scores. Both open and closed accounts count toward these metrics as long as they’re on your credit report.
- Recent activity: Recent inquiries can be a minor factor, and a new hard inquiry may hurt your score a little. The impact is often minimal, and you should still apply for credit when you need it.
Because the credit scoring factors are similar across multiple scoring models, the activities that may improve one of your scores can help increase all your scores.
Student loans are installment loans and can impact your credit scores in similar ways to an auto loan or mortgage. Applying for a private student loan may lead to a hard inquiry, which could hurt your scores. (Most federal student loans don’t require a credit check, so there won’t be an inquiry.)
Having the account in your credit history may help your scores, and making on-time payments can help you build a long, positive credit history. Missing a payment, or paying 30 or more days late, can lead to negative marks in your credit history, which can hurt your scores.
If you’re having trouble affording your student loan payments, you may want to look for alternative payment plans, forbearance or deferment. If your servicer offers one of these options you may be able to pay a lower amount or temporarily pause payments without hurting your credit.
You can check some of your credit scores for free by creating accounts with different financial information websites, lenders, credit card issuers or the credit bureaus. The scoring model and underlying credit report can vary depending on where you get your score. But remember, many credit scores tend to trend in the same direction.
No matter which score you’re focused on, a few basic actions can help improve your credit:
- Make payments on time: Making on time payments, even if it’s only for the minimum amount due, is one of the best things you can do to improve your credit over time.
- Pay down credit card debt: Lowering your utilization rate by paying down credit card debt can help you quickly improve your scores. This can even happen if you use an installment loan to pay off credit cards.
- Keep an open account: If you’re not repaying a loan and don’t have any credit cards, you may want to open a credit card that doesn’t have an annual fee. Having recent activity on your credit report can ensure you’ll stay scorable.
- Review your credit reports for error: If there are negative marks that are hurting your credit, but aren’t entirely accurate, you can file a dispute with the credit bureaus to get the error corrected.
Shannon Insler contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 6.65%1||Undergrad & Graduate|
|1.99% – 7.10%2||Undergrad & Graduate|
|2.99% – 6.44%3||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 6.43%4||Undergrad & Graduate|
|3.18% – 6.07%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020. Information and rates are subject to change without notice.
2 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.19% APR (with Auto Pay) to 6.43% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.43% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of June 15, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 6/15/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.19% effective June 10, 2020.