Protected: Pepperdine: Get Your Credit On!
October 17, 2008 by awjolls
Filed under Student Credit Scores
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Credit Score Impact On Student Loan Applications – Episode #65
October 17, 2008 by awjolls
Filed under Episodes, Student Credit Scores
This video talks a about student loan types and how they affect your credit score. First, when you talk about various types of student loans there are several types:
- government backed loans for students
- government-backed loans that are for parents
- private student loans
- consolidation loans.
Let’s address these one by one. Starting off with loans for students, credit scores aren’t checked because most students are not expected to have a credit history, so it wouldn’t be that useful in assessing risk. These loans are the Stafford loans and Perkins loans.
Next, parent’s government-backed loans. These are the PLUS loans — a parent loan for an undergraduate student — and in this case the credit of the parent is checked but the credit score matters little in the decision to approve a loan. Unless you’re late on a current loan then you’re probably going to be approved — they’re looking for the exact behavior that they’re trying to prevent on their loans. So, as long as you bring your loans up to date – even if your credit score is not good – they will probably grant approval.
Next, private loans. Private loans are not government-backed securities so you should expect these lenders are looking for little bit more risk protection and they definitely check your credit score. But, often it’s not for a lend/don’t lend decision but rather for figuring out what rate to charge you based on your credit score and credit risk. This is why private loans can typically have higher interest rates than the comparable government especially if you don’t have a great credit score as they will push up your rates.
Checking credit scores when it comes to consolidation loans is mixed. There are some consolidation loans that check credit and there’s some that do not. For example, Sally Mae’s Smart Loan does not require a credit score check and that is a consolidation loan. You really have to ask when you’re doing a consolidation loan to make sure the lender you’re using is either checking or not checking depending on what you’re looking for.
