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Having bad credit won’t disqualify you from getting a student loan. You can borrow federal student loans, which don’t factor in credit history.
But, if federal student loans and other aid isn’t enough to pay for college, you may need a private student loan. Getting a private student loan if you have no credit or bad credit (a score below about 630) is trickier. Here’s how to do it.
Always apply for federal loans first
Federal student loans carry lower interest rates than private options. They also offer income-driven repayment plans, which will cap your payments at a portion of your income and extend your term length. You also may qualify for forgiveness programs with federal student loans.
To apply for federal student loans, submit the Free Application for Federal Student Aid, known as the FAFSA. The FAFSA will also qualify you for free aid that you should accept before borrowing any money. Free aid can include grants, scholarships and work-study.
Get a co-signer
Having a co-signer will open up more private loan options for you. A co-signer who has a good credit score can help you get a private student loan with a competitive interest rate. However, the interest rate will be higher than what federal direct student loans offer. Compare offers from multiple lenders.
To qualify, your co-signer will usually need a credit score in the high 600s and steady income. They’ll be responsible to pay your student loan debt if you can’t.
Find loans that don’t require a co-signer
A few lenders offer private student loans for independent students that do not factor in credit scores. Your future income potential is usually considered instead.
Since credit isn’t taken into account, expect the interest rate you’re offered for these type of loans to be higher than other private loans with a co-signer.
Build your credit and refinance private student debt
Start to restore your credit while you’re in school. Your score depends mainly on payment history and credit utilization. It also relies, to a lesser extent, on the length of your credit history, mix of account types and any recent credit applications.
Consider making interest-only payments on your student loans while you’re still in school to help build your credit, in addition to other credit building methods.
Once your credit is stronger, consider refinancing private loans to get a lower interest rate. It works by replacing your current private loans with a new, lower interest rate, if you qualify.
Refinancing lenders generally require a solid income, a credit score of 690 or higher and a history of on-time debt payments.