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Private Student Loans and Credit
A private student loan can be provided to you as a non-need based loan specifically because it is a credit-based loan, similar to a personal line of credit. As such, it's vital to know exactly where your credit stands. This is a series of tutorials about credit that will help you get your credit on track.
What is credit?
Fundamentally, credit is a record of how timely you are in paying back money you have borrowed. Your credit is stored as a report and a score at a credit bureau.
Click Here to Improve Your Credit Score
How is credit judged?
Credit scores are numerical indexes based on an algorithm developed by Fair Isaac Company, called a FICO score. Scores are negatively impacted by events such as late payment, incomplete or partial payments, defaults, and judgments or liens, and range from 300 to 900. The actual algorithm is a trade secret of Fair Isaac, but the following breakdown approximates the weighted values that compose your score.
- 35% Payment history
- 30% Outstanding debt
- 15% Length of your credit history
- 10% Recent inquiries on your credit report
- 10% Types of credit in use
The "average" credit score for "good" credit is 675 or better for most major lenders, such as mortgage lenders. Scores lower than 625 demand scrutiny, while scores lower than 600 will often be denied outright. Learn about student credit cards and your credit score.
What is the required credit score for an private student loan?
Generally speaking, your private student loan application should be accompanied by a credit score of at least 700. Things that will drastically reduce your chances of getting an private student loan include:
- Bankruptcies
- Defaulted loans
- Payments overdue by 90 days or more
- Very high debt:income ratio
To ensure that you can obtain a private student loan for your education, it is essential to have a recent copy of your credit report, and to repair your credit report as much as possible. Click here for a tutorial on how to repair your credit!
As a service to private student loan customers, we offer you the ability to order your credit report and score online for a nominal fee, in partnership with the Fair Isaac Company.
