|
| Credit score |
Your credit score shows the likelihood that you will pay your debt as agreed. The lower your credit score, the more likely you are to neglect your debt. Most lenders rely on your credit score to determine eligibility for private student loans. Your credit score can also influence the cost of your debt, with lower interest rates and fees reserved for borrowers with better credit scores. Federal education loans do not depend on your credit score in comparison with private loans.
A credit score summarizes the information from your credit history into a single number. This helps to compare borrowers. It is believed that borrowers with higher credit scores are more likely to pay their debts on time and as agreed. The most famous credit score is the FICO score. FICO scores range from 300 to 850, the best possible is 850. Some credit reporting agencies have a broader range of scores.
Credit score can depend on the following factors:
1) Payment History 35%
2) Amounts Owed 30%
3) Length of Credit History 15%
4) New Credit 10%
5) Types of Credit Used 10%
6) Frequency, recency, and severity of credit activity
You will be able to get a private student loan if you have a FICO score above 630-650. Normally, more than two-thirds (85% to 95% by loan volume) of private student loan borrowers have FICO scores of 650 or higher. 21% to 25% of borrowers have credit scores of 760 or higher. The average FICO score is around 710.
There is private education debt which does not depend on credit scores. For instance, MyRichUncle's Preprime product that use other criteria, such as major, GPA, college reputation and year in school to evaluate credit risk. Another education debt which don’t need credit scores is so-called "opportunity loans". A lender provides a school with funding which can be lent to students without credit scores criteria (e.g., about 10% of the loan volume from loans funded with traditional criteria is available in the opportunity pool).
|
|
