Loans For Students Who Lack Credit History

You've spent your time researching the top universities, and you've made your choice. Now you just have to figure out how you're going to pay for it. You know you're going to have to borrow some money, but you also know you have absolutely no credit history. You've never bought a car. You don't have any credit cards.

How can you get a loan?
For some types of student loans, your missing credit history won't make a difference. Others require you to have a fairly good credit score. So how do you know where to turn for financial assistance? Government Loans There are several government loan programs---Stafford loans, Perkins loans and PLUS (Parent Loans for Undergraduate Students) loans---that have pretty low standards when it comes to credit history. These loans are designed to build access to education for lower-income students. The Stafford loan is the most popular federal loan, in which the student is the one who borrows the money. The good news for those with no credit history is that a Stafford loan does not require one. When you apply, the lender doesn't look at your credit report. The Perkins loan, which is designed for students who have the most financial need, also does not require a credit history. The only caveat here is related to any prior student loans you might have taken out. If you've defaulted on a student loan---or if you owe any money to the federal government---you won't be able to qualify for these types of loans. You might have no credit history, but it's likely that your parents do have one. So, they can take out a PLUS (Parent Loans for Undergraduate Students) loan.

Credit scores aren't taken into consideration with this type of loan, but credit history may be taken into account. Just make sure you aren't delinquent on any payments or in default on any loans when you apply for this loan, and you should be OK. Private Loans Sometimes, government funding just isn't enough. In this case, you'll likely have to turn to a private lender.

Private lenders do check credit history and will increase your interest rate and fees depending on whether your credit score is good or bad---similar to a mortgage lender. However, private lenders also will try to forecast your future income and will take that into account when considering your loan. For example, if you're working on a law degree, you might get a better interest rate than a student working on a master's degree in philosophy. Consolidation Loans Multiple loans can be rolled into a federal consolidation loan, which requires only one payment a month. With this type of loan, whether your credit history matters or not will depend on the lender. For example, there is no credit check for the Sallie Mae Smart Loan.

Don't Default on Your Loans: Establish Your Credit-Worthiness
Don't ever think that you can make your life easier by going into default on your student loans---or loans of any kind, for that matter. If you don't pay up, whoever loaned you the money---whether it's the federal government or a private bank---will send the bill collectors after you. What's worse, your credit score will sink, and you'll have trouble getting any kinds of loan in the future.

It might take 10 years to pay off your student loans, but every time you make a payment on that debt, you're establishing a payment history, which will bode well for your future credit purchases---such as a car or a home.

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