Student Loans and Credit

Many student loans are based on credit rather than on need. These loans are a great option for students and families who would not otherwise receive any financial aid.

What is credit?

Credit is essentially a record of how and when you pay back money that you have borrowed. Credit is made up by your credit history and represented by your credit score.

Credit History

Your credit history is a record of your past borrowing and repaying. This record goes back to the time when you opened your first account or got your first credit card. The information on this record makes up your credit report.

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Credit Score

Your credit score is a numerical representation of your credit. Scores range from 300 to 850. Your credit score is determined by your payment history, outstanding debt, length of credit history, recent inquiries on your credit report and types of credit in use. Usually late payments, incomplete or partial payments, and defaults negatively impact your credit score.

When applying for a credit-based student loan a score under 600 is usually denied immediately. Most lenders prefer that borrowers have scores of 650 or greater.

What kinds of student loans require a credit check?

PLUS Loans

PLUS Loans are federal student loans, but unlike most federal loans they are based on credit rather than on need. Lending of Parent PLUS Loans and Graduate PLUS Loans is determined by a borrower's credit history. In order to qualify for a PLUS Loan the parent or graduate student who plans on borrowing the loan must pass a credit check.

Alternative Student Loans

Alternative student loans are also non-need-based funds that can be used to help pay for college. Every alternative student loan lender requires a credit check in order to approve a loan. If a student cannot be approved for an alternative student loan on their own they can apply with a cosigner. A cosigner is a parent, or other adult, who in good credit standing and agrees to take responsibility for the loan if the borrower cannot make the payments.