Do you need a good credit score to get student loans? Well, 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 student loans to finance your education, you’ll need a good credit score.
Many students might not know what their credit score is or whether it’s good enough to get a private student loan on their own. 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?
First off, you need to know what your credit score is. There are a few options to check your credit score for free. Credit Karma and Credit Sesame are among the most popular.
But that credit score is just three digits — you’ll have to know more to figure out if your credit score is high enough that you’ll qualify for a private student loan.
Generally, you’ll need a credit score in the mid-600s or higher to qualify for a private student loan. Your chances of approval will increase if your FICO score is 690 or higher. Plus, you’ll start qualifying for lower interest rates at around 720.
However, different lenders have different 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 complete an application for a 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.
Are there other eligibility requirements for private student loans?
You’ll need more than a good credit score to qualify for a private student loan.
Lenders want to see that they can legally lend to you and that there’s a good chance you’ll repay your student loans.
On the legal end of things, you must:
- 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
Then there are the financial and employment requirements for private student loan borrowers.
Lenders look at the following factors to try to gauge if you can afford to repay your student loans:
- 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.
These requirements for private student loans pose a problem for many students. Although they are the borrowers who need private student loans, students are less likely to meet the requirements outlined above.
Many college students, particularly those working toward an undergraduate degree, have a limited credit history and a credit score that’s too low to qualify. It’s also common to work only part time or not at all while in school.
That’s where a co-signer can help.
What about applying with a co-signer?
The reality is most college students can’t meet the credit score, income, or other requirements lenders set. But that doesn’t mean private student loans aren’t an option.
One solution is to apply for private student loans with a co-signer. By doing so, you can:
- Get the good credit of a parent or other co-signer
- More easily qualify for the loan
- Get better interest rates
About 90 percent of private student loans are borrowed with the help of a co-signer, according to a Consumer Financial Protection Bureau (CFPB) report.
Not only are co-signers common, but some lenders, such as CommonBond, don’t accept private student loan applications without them. Other lenders, such as Citizens Bank, allow borrowers to apply with a co-signer if they don’t meet credit and income qualifications on their own.
If you do apply with a co-signer, make sure you understand how the arrangement works.
As the primary borrower, you will be expected to make monthly payments, but your co-signer is equally responsible for repaying the loan. If you don’t repay the loan, your co-signer will have to.
Also, any late or missed payments will damage both your credit and your co-signer’s credit.
Don’t forget to find out if your lender offers a co-signer release and under what terms. Citizens Bank, for example, allows a primary borrower to release a co-signer after making 36 on-time monthly payments.
Do lenders view graduate students differently?
If you’re a graduate student, you might have an easier time securing private student loans. 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 a co-signer for its general undergraduate and graduate student loans. However, it has no such requirement for its MBA 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 co-signer must have a good credit score to get student loans from a private lender.
If you need student loans now, enlisting a co-signer 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 2018!
|1 Important Disclosures for CollegeAve.
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.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB) or Turnstile Capital Management, LLC (TCM), which are not affiliated entities. Certain restrictions and limitations may apply. Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. All loan products may not be available in certain jurisdictions. Other terms and conditions apply. Ascent is a federally registered trademark of TCM and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* 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.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 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.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 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.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.69% – 10.94%1||Undergraduate, Graduate, and Parents||Visit CollegeAve|
|3.82% – 12.82%3||Undergraduate and Graduate||Visit Ascent|
|4.34% – 12.99%2||Undergraduate and Graduate||Visit Discover|
|4.12% – 10.98%*,4||Undergraduate and Graduate||Visit SallieMae|
|5.03% – 11.23%5||Undergraduate and Graduate||Visit PNC|
|3.88% – 12.88%6||Undergraduate and Graduate||Visit SunTrust|
|4.72% – 9.81%7||Undergraduate and Graduate||Visit LendKey|
|3.72% – 9.68%8||Undergraduate, Graduate, and Parents||Visit CommonBond|
|4.04% – 12.01%9||Undergraduate, Graduate, and Parents||Visit Citizens|