If you have been looking for a private student loan, you might have come across the word FICO. Your FICO score, or your credit score, is basically a rating assigned to you based on your credit history. A good score can help you get a car, a house, and, yes, a private student loan. So what do you need to know about FICO?
For starters, you should get your free credit score online. Here you will be asked a little about your financial history and background. If you’re a prospective undergraduate, don’t be alarmed if your score is very low.
Chances are unless you have been living on your own or developed some kind of credit history (i.e. you regularly pay off credit cards, pay back loans, etc.), you won’t be eligible for a private student loan and will require someone with a higher rating to a cosign the loan with you.
If you have checked your FICO score recently, here is a general look at what the figure means:
- 330 – 619: Odds are if you fall into this range you have either had a negative history or no history. If you want a loan, you will almost certainly need a co-signer.
- 620 – 659: This is a bit of a tough area. You will likely need a co-signer for a private loan. If you are a parent, you might be eligible to apply for a Parent PLUS loan, which has a fixed interest rate and has lower requirements for borrowers.
- 660 – 720: This is the range of average credit scores. Prime financing will be available to you, and you should be eligible for most loans at an average rate of interest.
- 721 – 750+: This is an excellent credit rating. You will get the best interest rates and have your pick of lenders.
So what are these numbers based on? A majority of your FICO score is based on how consistently you make credit card payments and how much of your credit you actually use. If you consistently use your credit card, but still carry a low balance (read: pay them off regularly), your score will be higher.