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- The average approved private student loan borrower in 2020 has a credit score of 748, according to data from LendEDU, higher than the average applicant credit score of 638.
- Federal loans should be the first place to borrow, with lower interest rates and no minimum credit score requirements.
- If you need a private student loan, your chances could be improved by getting a co-signer or raising your credit score.
- Visit SoFi to see how much you can save by refinancing your student loans »
The average borrower approved for a private student loan in 2020 so far has a credit score of 748, according to loan platform LendEDU, which averaged together data from hundreds of thousands of private student loan applications submitted to five private student loan lenders through the site’s student loan portal.
Credit scores are like a grade for your borrowing history, and all private student loan borrowers will consider your score when you apply for a loan. Scores fall on a scale of 300 to 850, in five categories, according to Experian:
- Very poor: 300 to 579
- Fair: 580 to 669
- Good: 670 to 739
- Very good: 740 to 799
- Excellent: 800 to 850
Checking your credit score should be your first step before applying for a student loan. You can access your credit score for free online.
The average student loan borrower’s credit score fell into the ‘very good’ category. According to data from Experian, about 46% of the US population has a credit score in the ‘very good’ or ‘excellent’ categories. If your score is not in that range, there are a few things you can do.
Federal loans should come first
For anyone who wants to borrow money for college, federal student loans should come before private student loans.
Federal student loans don’t require a credit check for many student borrowers, and can have lower interest rates than private student loans. For the 2020-2021 school year, all federal, undergraduate direct student loans will have an interest rate of 2.75%. For private loan borrowers in 2020, the average interest rate for a cosigned, fixed interest student loan is 10.20%.
Federal student loans are usually the smartest move for borrowing for college. However, there are some situations where you may need private loans, and there are a few ways to increase your chances for approval.
Consider a cosigner and work on your credit score
Most college students don’t have a long credit history, and could get a better interest rate by having someone like a parent or guardian co-sign their loan.
A co-signer is someone who takes on equal responsibility of the loan with you, and could also be held responsible for the loan if you stop paying it. According to LendEDU data, people were more likely to get approved with a cosigner. Of applications with a cosigner, about 36% were approved, while only about 8.8% of people who applied without a cosigner were approved. However, it’s worth noting that this could be a risky move for your co-signer: They could be required to repay your loan if you don’t, and any late or missed payments you make could affect their credit score, too.
Raising your credit score is another good way to increase your chances of being approved for a private student loan. Start by checking your score for free online, and making sure there aren’t any mistakes on your credit report. Paying bills on time, reducing your current borrowing, and increasing your credit limit could help increase your credit score.
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