What credit scores are needed for student loans?

You don’t necessarily need a good credit score for a student loan. And some loans don’t require a credit score at all. But there are some instances when you might.

And Federal Reserve data shows that more than half of people younger than 30 who attend college take on student loans or other debt. If you’re among that group, it might be helpful to find out what credit scores might be needed to receive a student loan.

There are two primary kinds of student loans: federal and private. Federal student loans are funded by the Department of Education. Private loans are usually made by banks, according to the Consumer Financial Protection Bureau (CFPB). Capital One, however, doesn’t offer student loans. Some schools and state agencies may also offer private loans, though.

So where do credit scores fit in? Good credit scores can be helpful for many reasons. And that includes some student loan applications, according to Casey Prostko, a CERTIFIED FINANCIAL PLANNER™ and expert in student finance.

“A high credit score communicates a responsible history of on-time payments, a reasonable use of available credit and a likelihood to make on-time payments in the future,” Prostko says.

It’s important to remember that credit scores can come from multiple companies. FICO® and VantageScore® are two common examples. That means you have multiple credit scores that lenders may see and use. And those scores can vary depending on a bunch of factors.

“Any credit score depends on the data used to calculate it,” the CFPB says. “And [scores] may differ depending on the scoring model, the source of your credit history, the type of loan product, and even the day when it was calculated.”

There are four types of federal student loans: subsidized, unsubsidized, PLUS and consolidated. Only PLUS loans require a credit check. But the check—and whether you’re approved for the loan—isn’t tied to credit scores.

“The credit check for PLUS loans is looking for adverse credit history, not a specific score,” Prostko says. “Adverse credit history includes items such as bankruptcies, foreclosures or delinquent accounts.”

Even if you have an adverse credit history, the Department of Education says you still may be eligible for PLUS loans. But there are extra requirements.

You can learn more about applying for a federal student loan from Capital One and the Department of Education. The process starts with the Free Application for Federal Student Aid, often called FAFSA® for short.

Similar to other types of loans, a higher credit score makes it more likely you’ll qualify for a student loan, according to Prostko. 

“Most lenders prefer at least a good credit score,” she says, noting a good FICO credit score falls between 670 and 739.

But lenders determine qualifications and make lending decisions on their own. And those decisions can be based on factors beyond credit scores, Prostko notes. When it comes to student loans, those factors could include debt-to-income ratio, current income and even field of study.

If you have a low credit score or no credit score at all, private lenders may require a co-signer. That’s someone who agrees to repay the student loan if you can’t. And if payments are late or missed, it could end up hurting both your credit and your co-signer’s credit, according to the CFPB.

Interest rates and fees for private loans can vary. But, the CFPB explains, a co-signer with a good credit history may increase your chances for approval and may help get you a better rate.

It may be worth checking your federal loan eligibility first. In fact, the law pretty much requires it. 

Before a private loan can be paid, borrowers must fill out a form called a self-certification letter. The form encourages people to “pursue free or lower-cost” loans. And it warns that having private loans could hurt eligibility for other government or school aid.

Many people have a mix of federal and private student loans, according to the CFPB. But one reason private loans may not be the best option is because of interest rates.

“Private loans can be more expensive,” the CFPB says, “rates have been as high as 16% over the past couple of years.”

Compare that to the Department of Education’s interest rates on federal loans made on or after July 2020 and before July 2021. Rates for undergraduates are just 2.75%. That’s almost six times lower than what the CFPB says about private loans. And even PLUS loans, which had a 5.3% interest rate during the same period, could be much lower than private loans.

The CFPB also says repayment terms for private loans may be stricter, with fewer options to reduce or delay payments.

When it comes to refinancing or consolidating your student loan debt, it’s important to consider what type of loans you have. When it comes to refinancing private loans, the CFPB has said you may need excellent credit. Prostko adds an interesting note about the credit scores of people who actually end up refinancing.

“Many private lenders have a minimum credit score required to apply for private loan consolidation, such as 650 or 660,” she says. “However, the typical credit score is 700 or above for those who finalize consolidations.”

If you have federal loans, you may be able to combine them into a single loan with a lower interest rate. Aside from the interest rate, the Department of Education says there’s no cost for you to consolidate your loans. 

If you’re considering refinancing or consolidating your loans, Prostko offers three questions to consider first:

1. Do your loans have high interest rates?
2. Do you plan on using federal student loan features, such as loan forgiveness, repayment plans, payment deferrals or forbearance?
3. Do you want to consolidate federal and private loans?

Prostko also says you should consider more than just having a single loan payment or lowering your interest rate: You should also think about your needs for today and the future. You can learn more about the pros and cons of loan consolidation from the Department of Education.

But if you have high variable interest rates, if current rates are low and if your credit score and income are improving, Prostko says you may have your answer.

“If the above apply, the sooner you consolidate or refinance, the better,” Prostko says, noting it may help you maximize how much refinancing helps you save.

If you want to check your credit score, you can use CreditWise from Capital One. The tool can show you your VantageScore® 3.0 credit score, among many other helpful features. Best of all, using CreditWise won’t hurt your credit score, and it’s free for everyone. And at AnnualCreditReport.com, you can get free copies of your credit reports from each of the three major credit bureaus.

Whether your credit score is considered for a student loan or not, doing some homework could help set you up for success. And remember, student loans may not be your only option. Grants, scholarships and other forms of student aid could also be available.