What Credit Score Do You Need To Get A Private Student Loan?

If you’re looking to get a Federal student loan to finance your education, you’re not required to have any precise credit score to be eligible for the loan.

But if you’re considering private lenders, you are required to show your creditworthiness with your credit score.

Find out why a federal student loan could be your preferred option here.

Another option is to get a student loan cosigner with good credit and is ready to help you out with your application.

If you have bad credit, find out how you can still qualify for a private student loan here.

So what exactly do lenders look for before authorizing a student loan and what credit score do lenders expect from a student before granting a private student loan?

Wondering how the entire student loan process works? Start here.

Credit Scores You Need To Be Eligible For A Private Student Loan

While you’re contemplating if you or your cosigner’s credit score will be eligible for a private student loan, it is absolutely crucial for you to understand how lenders look at different credit scores:

Credit Scores of 720 and above

With this credit score, you’ll have access to the best private student loans because your credit score will pave the way for you.

Most importantly, you’ll enjoy the benefits of getting the lowest student loan rates.

Credit Scores of 690 – 720

Once your credit scores are in this range it will be easier and quicker to find private lenders who are willing to offer you private student loans.

Also, your private student loan rates should be near the middle range of private lenders rates.

Credit Scores of Mid 600 – 690

Only a few private lenders will be willing to offer you a student loan. Also, your chances of being eligible for a loan without a cosigner will be slim.

If you eventually get a loan without a cosigner, you may end up paying costly private student loan rates.

Credit Scores of Mid 600s or Lower

If you have a credit score within this range, many private lenders will consider you as unqualified for their loans if you don’t have a cosigner.

You may have to turn to student loans option for bad credit like the federal student loans. However, another way out is to get a cosigner.

How To Be Eligible For A Private Student Loan

Your credit score ultimately determines if a lender will be willing to offer you a private student loan or not. But that isn’t the only thing lenders look at.

Let’s start with a simple checklist:

What’s Your Credit Score?

Before you make any move about your student loan, you have to know what exactly is your credit score.

But many college students don’t know what their actual score is which makes it very tricky for them to figure out if they are eligible for a private student loan or not.

However, there are several different websites that offer free credit score checking services. You should consider visiting Credit Karma and Credit Sesame to check your credit score for free.

Do You Meet Legal Borrowing Prerequisites?

Private student loan lenders are required to adhere to several different states and federal laws before they can operate as a legal business entity.

On their part, lenders also set requirements for giving out loans to students.

Many of such requirements include the following:   

  • Applicant should be a U.S. citizen
  • Be at least an 18 years old individual
  • Provide proofs that he or she has been enrolled in an educational program for not less than half the time
  • Agree to use the student loan for educational costs only

Some private student loan lenders only provide loans to students in some specified states or to students who only enrolled to particular college.

So you should play it safe by visiting a lender’s website to see all their requirements before applying for a loan so you wouldn’t end up wasting your time.

What’s Your Income And Debt History?

Apart from your credit score, lenders may look at some other financial details including your debt history and employment history before making up their mind to either give you a loan or not.

Here are some of the key metrics lenders look at:

Your Credit History

When lenders look at your credit history, they look for things such as delinquent accounts, bankruptcy, and late payments etc.

Lenders also consider other things such as your mix of credit accounts and your payment pedigree history.

Lenders want to know if you repay your debt on time or if you have a history of late payments.

Your Income And Employment

Lenders are aware that as a student you may not have a job or a regular paycheck.

But if you do have one, it can boost your chances of getting a student loan.

All you have to do is provide a proof of employment and income like your recent paycheck.

DTI Ratio

This is your debt to income ratio. Before approving or turning down your loan, lenders will assess your monthly income and compare it to your monthly debt to figure out if you can afford extra payments.

Many lenders are often interested in debt to income ratio rate of 28% or less. Lenders may also look at your mortgage or rents too.  

Ask For Private Student Loan Rates Quotes

All private student loan lenders have specific credit score requirements for their loans which you may never find in their ads.

So sometimes, the easiest way to figure out if you’re eligible for a private student loan is to request for a loan rate check.

Lenders can conduct a soft credit check to make an estimate. Though not all lenders can do this.

So make sure you ascertain if the lender is about to conduct a soft or hard check on your credit score before going ahead.

Don’t forget that a soft inquiry will not have any impact on your score but a hard one will affect your score.

As soon as the lender finds out that you’re eligible for a loan, you’ll get a list of all the rates the lender is ready to offer you.

But if you’re not eligible, your lender can figure that out without a hard check that will affect your credit score.

What happens if you don’t meet the required credit score for a private student loan?

Truth is, many students do not meet lenders requirements for a private student loan as a result of their credit score, income and other requirements set by lenders.

But there’s a way out. You can apply for a private loan with a cosigner.

Applying For A Private Student Loan With A Cosigner

When you apply for a student loan with a cosigner, you can get the good credit of that individual, get a better chance to be eligible for a private student loan, and end up with better interest rates.

Interestingly, up to ninety percent of private student loans are obtained with the help of a cosigner.

In fact, some private lenders won’t give students loans if they don’t have any cosigners.

While others only request for a cosigner if the student couldn’t meet the credit score or other requirements for the loan.  

You should find out if the lender you’re considering has a cosigner release and with what terms and conditions.

What Should You Consider When Choosing A Private Student Loan Cosigner?

It is absolutely crucial to understand the risks that are placed on a cosigner when he or she agrees to help you get a private student loan.

You should be aware that once a cosigner helps you obtain the loan, he or she will be held responsible for repaying the loan even if you dropped out of college.

Also, if you’re unable to repay the debt, your cosigner will be responsible for paying the previous due amounts, interest fees and other related charges.

So you should only consider getting a private student loan with a cosigner after considering all other means of funding your education including scholarships and federal student loans.

Once you’ve made up your mind to go for a private student loan, you should choose your cosigner carefully, considering all the risks involved.

Also, you should consider other factors before asking anyone to be your cosigner.

Here are the key things you should look for in a cosigner:

1. Cosigner’s Credit History

As a result of the financial meltdown of 2008, being eligible for unsecured consumer credit became difficult.

For students seeking for a private student loan, getting one with a cosigner with a good credit history and a steady source of income seems to be the norm.

So you’ll need a cosigner with a low debt to income ratio and a track record of making payments at the right time.

But what credit score should your cosigner have?

Private student loan lenders often grant loans if you have a cosigner with a credit score of 720 or above.  

However, cosigners with a credit score in the range of 680 and 20 may be able to help you obtain a loan but with higher interest rates.

Learn more about the 5 key factors that affect your credit score here.

Find out all you need to know about credit score in this ultimate guide for beginners.

2. Cosigner’s Financial Stability

Aside having a worthy credit score, lenders also considers cosigners’ stability.

Some of the key things they will review are the cosigner’s job history, and how long the cosigner has been residing in his or her home.

You should consider going with a cosigner who has worked with the same employer for not less than a year and with an income that can be verified.

In fact, the more time the cosigners has resided in the area and keep up with a steady income, the higher your possibility of obtaining the private student loan.

3. Cosigner’s Health

This may seem funny but the health status and the age of your cosigner is important too.

While this may not be something lenders take very serious, you should consider it before choosing anyone as a cosigner.

If your cosigner is above the age of 65 and has a poor health, your entire loan agreement could change when you least expect.

How is that possible?

Some private student loan lenders attach a clause in student loan agreement that makes it possible for them to request for full payment once your cosigner dies.

Worst still, the lender may decide to place your loan in default, not minding if you’ve made your payments at the appropriate time or not.

4. Your Relationship To Your Cosigner

It is easy to assume that only your parents can cosign a private student loan for you, but that’s not true.

Other people such as your spouse, friend, cousins, siblings, relatives, etc. may help you get a private student loan as a cosigner.

In fact, anyone that is willing and has a good credit history alongside whatever your lender requires can be your cosigner.

However, you should bear in mind that your cosigner is taking a risk by going into a binding contract on your behalf.

If you’re unable to make payments for whatever reasons, you may end up damaging you and your cosigner’s credit and also put an end to your relationship.

So you should consider writing a contract before asking anyone to be your cosigner to a private student loan.

Your contract may contain precise details about how you intend to pay back the loan like creating an automatic payments.

You should also include statements such as you will pay back any missed payments and fees involved throughout the loan’s lifespan.

While this is not mandatory, it will put your cosigner’s mind at peace. Once your loan is approved, you shouldn’t hesitate to send a “thank you” note to your cosigner.

What Happens If You’re A Graduate Student?

If you’re considering an advanced degree, it may be easier for you to obtain a private student loan for grad school.

This is because graduates and college students have more assurance about their earning potential and job prospects.

Also, graduate students have better chances of having employment history with good pay check.

This is mostly true if such graduate have spent years working after the completion of their undergraduate degree.

They usually have longer credit history too and this allows lenders to have a crystal clear idea about the candidate’s financial management.

Even more, many lenders provide private student loans precisely to graduate students that involves different prerequisites.

Some lenders require cosigners for graduate student loans and general undergraduate student loans.  

Some lenders are only interested in offering loans to students undergoing MBA, law, dental, medical or similar graduate programs with a high prospects of high-paying paycheck.

Bottom Line

You should consider a federal student loan first before considering other options.

However, private student loans can be crucial as they can help cover up for several different college expenses.

However, you’re required to have a good credit score or find a cosigner that has one to be eligible for a private student loan.

In whatever you do, remember that it is never too late to start building your credit score in order to boost your chances of being eligible for a private student loan in the future.

Williams Oleije

Williams Oleije

Williams Oleije is an Inbound Marketer, and a pop culture enthusiast. He's an avid researcher about how digital media is transforming marketing in several industries.

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