The Importance of Your Credit Score When Applying for a School Loan
College is supposed to be the door that opens opportunities for graduates to enter the workforce full-time and start living the life they want to have. Unfortunately, the reality for today’s teenagers is that a college education is a luxury many families cannot afford.
So, what alternatives do parents and students have when it comes to paying for a college education? Student loans are usually available directly from the financial aid office of campuses nationwide, as well as through most financial institutions. Student loans are a reality for many students nowadays, but not everyone knows exactly what it takes to be approved for one.
Just because you’re a student, doesn’t mean you’re automatically approved for a student loan. Financial institutions still need to determine if you’re creditworthy, and they do this by checking your credit report and score to see if you’re financially responsible. This involves reviewing how you’ve used any accounts that have been in your name, such as a student credit card or mobile phone account.
Still, it is much easier to get approved for an education loan since these credit instruments are backed by the US government. This means that in the event that you default on the loan, the bank still gets paid. That said, it doesn’t mean student loans are a free for all, you still have to qualify for the loan. They just happen to be easier to secure than a credit card for the same amount. For example, it’s easier to get student loan for $15,000 than it is for you to secure a non-secured credit card for the same amount.
Students who worry they can’t get a loan by themselves can still afford to go to college with the help of their parents, who can co-sign for their student loan — if the parent`s credit score qualifies. That’s because, very often, students have no credit score (particularly if they don’t have a student credit card), so they must rely on their parents to co-sign for their student loans.
That said, parents should be sure they aren’t tying up their credit in a loan that could prevent them from purchasing a home down the line.
Parents should start teaching their kids how to be financially responsible and establish a credit history at a young age. This way, their kids understand the importance of credit throughout their young adulthood, especially when the student loan is in their name.
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Whether you’re applying for college right out of high school or going back for a higher degree, understanding the role your credit plays in paying for college is important for any student.
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