You might not need a credit score for a federal student loan, but you will need one if you want to take out a private student loan.
If you haven’t figured it out already, student loans come in all shapes and sizes.
And in this case, trying to figure out what credit score you need to take out a student loan depends directly on what kind of loan it actually is.
If you don’t have a credit score or if your credit score is bad, don’t worry, you have options, and we’re here to help you!
Here’s exactly how your credit score affects what types of student loans your eligible for and how you can potentially refinance your loans down the road.
Federal loans = no credit score required
No credit score? No problem. Taking out a federal direct undergraduate loan means you don’t need a credit score or a co-signer to get access funds.
Federal direct student loans are the preferred loans for college students. They have lower interest rates and income-driven loan forgiveness options.
To receive a federal direct student loan you have to be enrolled in an eligible program and meet basic citizenship requirements.
You must also submit the Free Application for Federal Student Aid (FAFSA) to be considered. Lucky for you, this is the one and only application you will submit for all your student loan needs including grants, scholarships, and work-study.
Upon graduating, making payments on a federal student loan will help build your credit.
FYI: a credit score will not appear with the credit reporting bureaus until approximately six months after you start paying back the loan.
Private loans = credit score or co-signer required
Most lenders will require you to have a good credit score, around 670 or higher on a 300-850 scale used by FICO.
Rest assured, if you don’t have a credit score or if your credit score is bad, you can alternatively add a co-signer to your loan.
The responsibility of the co-signer is pretty important, as they will become the person who pays if you cannot, so choose wisely. Typically a parent or close relative is the best option
I’m sure you’re wondering why you’d take out this type of loan in the first place?
Federal direct loans have a cap so that everyone can take advantage of the assistance, and most tuition is more expensive than the cap allows per student.
What credit score does a cosigner need for a student loan?
The co-signer will need a good credit score and a steady income in order to qualify for a student loan.
The ideal range that most credit companies/lenders are looking for is between the 680 - 720 range or higher.
If your cosigner's credit score is lower than this, you may still be approved for the loan, but at a higher interest rate.
Rest assured, you might be able to negotiate your interest rate if this happens.
Private loans that don’t require a credit score history or co-signer
Believe it or not, private loans that don’t require either a credit score history or a co-signer exist. They consider earning potential instead of credit history.
Be wary of these loans, however.
They tend to carry much higher interest rates than federal student loans and credit-based private student loans.
Whatever choice you make, be sure to compare student loan rates to ensure you make the best financial decision for you.
The credit score needed to refinance student loans
If you already have student loan debt, refinancing your loans can save you money by reducing your interest rate and make it easier by consolidating your loans all in one place.
To get the best rates on student loan refinancing, you have to have good or even excellent credit to qualify.
Minimum credit score requirements for refinancing are in the 650 to 680 range
Obviously, in order to get the best rates, your credit score needs to be off the charts
Credit scores greater than 700 are typically what get approved for student loan refinancing.
Similar to private student loans, it might be possible to refi your student loans with a co-signer, but you should only do this if you have bad or no credit.
When refinancing your student loans, it’s good to be aware that refinance lenders look at other factors such as your debt-income-ratio.
Expect lenders to look for a debt-income-ratio of about 50% or less. 20% is the ideal ratio that should make you feel secure in whatever decision you make.
If you’re serious about student loan refinancing, we have a checklist to get all of your documents in order to start the application process. Download it below!
Student loan refinancing takes a little prep, but reaps a lot of rewards. Including lower payments and an earlier payoff date. See what you need to get started by downloading the FREE guide to help you