Since eligibility for all credit-based educational loan programs (Federal Direct Graduate PLUS, private educational loans) is determined on the basis of the borrower’s credit history, we strongly advise you to obtain a copy of your credit report, which is a snapshot of your credit history. Several credit bureaus and their telephone numbers are listed below:
Lenders review the individual borrower’s demonstrated financial responsibility when deciding on a credit application. Therefore, it is recommended that borrowers familiarize themselves with the various components that enter into a lender’s decision to extend credit.
In deciding on a loan application, lenders will examine your credit history in an effort to determine the likelihood that you will repay your loans in the future. The method they use to decide your credit-worthiness is called credit scoring. Some factors used to calculate your credit score include promptness in paying bills, number of credit inquiries and/or credit cards, total credit limit, and the amount owed on your accounts, especially your revolving accounts.
While some student borrowers may be concerned about the effect of high educational debt or multiple student loans on their credit score, these factors are not as important as how well you managed your credit in the past. Finally, a credit check is required to be eligible for the Federal Direct Graduate PLUS loan, but the credit criteria is less stringent than with most private student loans.
The following are some of the factors that can negatively affect your credit score:
- serious delinquency
- derogatory public records
- collection accounts
- high proportion of balances to credit limits
- too many new accounts
- too many accounts with balances
- too many credit inquiries in the past 12 months
- too many finance accounts.
Please keep in mind that some negative credit information, including student loan default, can remain on your credit report for up to seven years, and that bankruptcy can remain for 10 years.
If you have had problems with any creditors over late payments, disputed debts, or defaults of any kind, you should make every effort to resolve them well before the start of your studies. Students with an adverse credit history may not be able to secure the loans necessary to finance their education. If this is the case, you will need to have others borrow on your behalf, or find other means to finance your education. Please keep in mind that Law School funds will not be available to replace unavailable credit-based loans.
For more information on the importance of good credit, visit your lender’s website. For helpful information on credit scoring, visit the Fair Isaac Corporation (FICO) website.