Are you planning on going to college? Are you already in college? If so, there is a good chance that you will need access to student loans. In fact, of the 20 million students who go to college on a yearly basis, 60 percent of them have to borrow money to pay for their schooling expenses. As of 2013, there are more than 37 million people who have outstanding student loans. With so many people tapping into student loans, it only makes sense that lenders are becoming stricter on their lending policies. Let's take a close look at how your credit can affect your ability to obtain student loans. 

You need to understand that when applying for most federal student loans, as well as most private student loans, your credit score and history will largely affect your ability to qualify for them. With that being said, if you have less than decent credit, you may run into problems when it comes to financing your school-related expenses. Also take into consideration that having no credit sometimes works the same way as having bad credit. While some people believe avoiding credit cards is a wise financial choice to make, without them it oftentimes becomes unlikely to establish credit, meaning one to two credit cards, with a balance lower than 20 percent of the cards' limits, will be helpful when applying for student loans. Just make sure you never exceed your credit limit, and always make your payments on time. 

If you are looking to apply for a Stafford and/or Perkins federal loan, take comfort in knowing that you won't have to undergo a credit check. You should always apply for these types of loans before applying for other types. Reasoning behind this is that these loans are accompanied with very low interest rates as well as flexible repayment plans. 

Federal PLUS Loans

Parents are able to apply for PLUS loans, which provide financing for their undergraduates' schooling expenses. In addition, graduate-level students can apply for the loans. With an adverse credit history, parents and graduate students will not be approved for such loans. Adverse credit history includes:

- Having any debts that are 90 days late
- A bankruptcy discharge in the past five years
- A foreclosure in the past five years
- Any type of tax lien or wage garnishment
- Any type of active repossession

With a less than decent credit score, it is still possible for parents and graduate students to qualify for a PLUS loan because it is only important that a person not have an adverse credit history within the past five years. For those with an adverse history, some lenders will still allow a person to qualify; however, they will need a co-signer who has good credit. 

Understanding Your Credit Score and Private Student Loans

Although federal loans have favorable terms, many times, they will not provide enough coverage; this becomes more and more true with each passing year as tuition costs and school-related expenses increase. Due to these spiraling costs, students oftentimes turn to private student loans. As of 2013, about 14 percent of undergraduate students have such loans. When applying for private loans, take note that both your credit score and credit history will be used to determine whether you qualify or not. Also, keep in mind that private loans tend to be accompanied with higher interest rates than federal loans, and they also have less favorable terms and repayment plans. 

For a private student loan with favorable terms, you will need a credit score of 800 or higher. With a score under 620, you won't qualify. When applying for private loans, many of them will be accompanied with a low interest rate for a predetermined period of time, but beware the rate will increase after the introductory period passes by. In fact, it is not uncommon for such rates to more than double. With poor credit, you may as well plan on paying at least 18 percent interest on a private student loan. 

Establishing and Repairing Your Credit

Before you apply for a private loan, apply for federal loans first. If you find yourself applying for PLUS loans or private student loans, you will first need to establish decent credit. If you don't have good credit, you must first go about repairing it. To do so, take heart the following tips:

- Take a Look at Your Credit

Before applying for loans, at least six months in advance you will need to take a look at your credit report. If you notice any errors, make sure to have them corrected. In doing this, you can help improve your overall credit history. Remember, you can obtain three free credit reports each year, so don't waste your money paying some third-party to retrieve it for you. 

- Steer Clear of Your Credit Limits

If you have credit cards, make sure you stay away from your credit limits. In fact, the best thing to do is stay well below 20 to 30 percent of your limits; however, if you find yourself swiping your credit card on an often basis, just make sure you don't exceed any of your cards' limits, and more importantly, always make your payments on time. 

- Ask to Be an Authorized User

Some credit card companies will export the historical data of parents and/or spouses to authorized users. If you have a parent or spouse who has good credit, ask about becoming an authorized user on one of their credit card accounts. They don't have to actually give you a card, but just being on the account will help boost your credit score. 



Always keep in mind that if you exhaust your federal financial aid and private student loan options, there are community colleges that you can attend until you go to a major university. In doing this, you will be able to save tons of money.