What Is Considered Good Credit? (and Why It Matters for Student Loans)

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what is considered bad credit

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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?

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.

Student loans and your credit score: Why it matters

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.

How is your credit score determined?

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.

How student loans affect your credit score

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.

How to check — and improve — your credit score

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 2021!
LenderVariable APREligible Degrees 
1.89% – 5.99%1Undergrad
& Graduate

Visit Splash

1.99% – 5.64%2Undergrad
& Graduate

Visit Earnest

1.99% – 6.84%3Undergrad
& Graduate

Visit CommonBond

1.91% – 5.25%4Undergrad
& Graduate

Visit Lendkey

2.25% – 6.53%5Undergrad
& Graduate

Visit SoFi

2.17% – 4.47%6Undergrad
& Graduate

Visit PenFed

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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 Feburary 1, 2021.

2 Important Disclosures for Earnest.

Earnest Disclosures

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 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% 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 October 26, 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 10/26/2020. 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.

3 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. 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 0.15% effective Jan 1, 2021 and may increase after consummation.

4 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 02/17/2021 student loan refinancing rates range from 1.91% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay.

5 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: 1. Fixed rates from 2.99% APR to 6.99% APR (with AutoPay). Variable rates from 2.25% APR to 6.53% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.12% plus 2.38% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The discount will not reduce the monthly payment; instead, the interest savings are applied to the principal loan balance, which may help pay the loan down faster. Enrolling in autopay is not required to receive a loan from SoFi. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score.Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

6 Important Disclosures for PenFed.

PenFed Disclosures

Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.99%-5.15% APR and Variable Rates range from 2.17%-4.47% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. 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.