Your Credit Score: What it Can and Can't Affect
Your credit score can have a huge effect on your life. It can be a scary number—especially if yours is low. However, there are a few things your credit score has no impact on. Here’s an overview of what areas of your life will be strongly affected by your credit score—and where it can’t hurt you.
Things Your Credit Score Affects
Your interest rates—and whether you can get a loan
This is the main thing your credit score has an effect on—and its original purpose. Lenders use credit scores to determine how much of a risk you are to lend money to. Someone who always pays back their loans on time and has never missed a bill payment will naturally look better than someone who’s late on payments or who has defaulted on a loan.
If you have a low credit score, you will probably have to pay higher interest rates—because lenders will want to get as much money back from you as possible before you default or start skipping payments. If your score is really bad, you may not be able to get a loan at all.
Your credit score will have an effect on almost every loan you take out—except federal student loans, in most cases.
Landlords will check your credit score when deciding whether to rent to you. If you have bad credit, this could affect your chances of getting an apartment—especially in competitive real estate markets like New York. People with bad credit sometimes need to get co-signers on apartment leases in order to close the deal.
Private student aid
Even when searching for funding to attend the most affordable online colleges, private lenders will look at your credit score—or your parents’—in determining whether you will get a loan and what interest rate you will have, in much the same way they would with other types of loans.
Whether or not you get a job
Believe it or not, some employers will look at your credit score when determining whether to hire you. Employers defend the practice by saying that for some positions, it’s relevant—including positions where the job applicant would have to manage a budget. In some cases, employers use it as a disqualifying item to narrow down their lists of applicants in a competitive job market.
Things Your Credit Score Has No Effect On
Whether you get into college
Colleges generally do not take credit scores into account when judging whether or not to grant you admission. The same is true for most online postgraduate programs.
Federal financial aid—sometimes
Usually, your credit score does not have an effect on federal aid. There are exceptions to this, however. The government will not lend to you if you’ve already defaulted on a federal loan or owe the government money for some other reason. Parents taking out PLUS loans usually don’t have their credit score counted; however, they can fail to qualify if they have what the government considers an “adverse credit history,” which occurs when you are over 90 days delinquent on a loan (government or otherwise) or have had major issues with Title IV debt within the last five years.
Your scholarship eligibility
Scholarships for online students vary depending on the type of scholarship and the expectations and requirements of the granting organization. While some scholarships are given based on financial need, your credit score is usually not considered as part of this. This includes federal Pell Grants.
Your credit score will have an effect on almost every loan you take out—except federal student loans, in most cases. It can sometimes have an effect on whether or not you’re hired—but it won’t affect your college admissions. And while it does affect private student loans as it would other loans, your chances of winning a scholarship are generally not affected by your credit score. If yours is low, there are steps you can take to improve it—and your financial prospects - before you start your online distance education degree.
More About Understanding Student Loans
- Credit Repair Services You Should Never Pay For
- Questions You Should Ask Before Applying for Student Loan Forbearance
- The Bank on Students Act: What It Is, and How It Could Help Student Borrowers
- How the Death of a Co-Signer Can Affect Your Student Loan
- Peer-to-Peer Student Loans: What They Are, and How They Can Help You Pay for College
- If You're Unable to Work Because of a Disability: What Happens to Your Student Loan?
- New Rules for Debt Collectors: How They Could Affect Your Student Loan
- Having Trouble Repaying Loans? The Department of Education May Be in Touch