As a student loan lender, we get a lot of great questions about how student loans affect credit score. The answer depends on whether you’re talking about federal or private student loans.Federal loans don’t take credit scores into account, which is why every borrower gets the same interest rate regardless of financial profile.
However, federal PLUS loans do require that borrowers not have an adverse credit history, which is defined by Fin Aid as “being more than 90 days late on any debt, or having any Title IV debt within the past five years subjected to default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment or write-off.” For private lenders, your credit score is usually a key factor in determining not only student loan approval, but also the attached interest rate.
In other words, the better your score, the better your rate.
Your credit utilization ratio refers to–how much of your available credit is used up.
Your credit utilization ratio makes up about 30% of your credit score.
We’ve got you covered with our Student Loan Smarts blog series.