Here’s the Credit Score You Need to Refinance Student Loans

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Stanley Tate

#1 Student Loan Lawyer

Updated on October 6, 2022

A minimum credit score in the mid-600s is needed to refinance federal and private student loans.

It’s hard to refinance student loans with bad credit without adding a cosigner or improving your credit first.

To qualify for student loan refinancing, you’ll generally need a credit score of at least 650. With a higher credit score, you may be eligible for better rates and terms. Before applying, it’s a smart bet to check your credit report and scores with the three major credit bureaus: Equifax, Experian, and TransUnion. This will help you get the best possible rate when you refinance.

A good credit score isn’t just important for refinancing student loans — it helps you anytime you need to borrow money. It can also help you get approved for other financing options, like a mortgage, auto loan, or credit cards that offer enhanced rewards programs.

Ahead, learn what credit score you need to refinance student loan debt.

Minimum credit score requirement

Nearly all lenders have a minimum credit requirement to refinance student loan debt. Most lenders will want you to have a FICO score of at least 650, which is considered fair. Although you’ll likely be approved with this score, you won’t qualify for the best repayment terms and lowest interest rates. Those benefits are saved for borrowers with good credit — or who have a cosigner with good credit. Read more about how to get a cosigner release for private loans.

In addition to looking at your score, there are a handful of lenders like Earnest who look at other factors to determine your creditworthiness, including your:

  1. Personal finances

  2. Earning potential

  3. Debt-to-income ratio

  4. Education background (e.g., degree, universities attended, etc.)

Learn More: Private Student Loan Forgiveness Programs

Benefits of having good credit when refinancing

Benefits of having good credit when refinancing

Your credit score is the most important factor lenders use to determine the refinance rate for the new loan. The higher your score, the better chance you have of getting a lower rate, which could lower your monthly payments while helping you pay off the loans faster.

Another benefit of waiting to apply until you have good credit is that you have the option to shop around and pick the best lender for your situation. This can be great if one lender offers a benefit that others don’t — like the ability to skip a payment or make income-based payments for a limited time.

You can also use a tool like Credible to prequalify with multiple lenders without adding a hard pull to your credit history. After you apply, you can compare refinance rates, loan terms, and origination fees.

You can pull a free copy of your report from all three major bureaus using annualcreditreport.com.

Learn More: How to Refinance a Student Loan With Bad Credit

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Requirements for refinancing a student loan

Good or excellent credit is the minimum requirement to refinance your federal or private student loans. You may also be required to show that you:

  • Pay your current loans on time. A consistent payment history demonstrates to private lenders that you pay your bills on time and suggests you’ll likely do the same with the new loan.

  • Have a stable income. The loan servicer may ask to see your W2s, tax returns, and recent pay stubs and bank statements to evaluate your ability to keep paying on the refinance loan well into the future.

  • Have a low debt-to-income ratio. When paired with a stable income, a low DTI indicates that you’ll be able to afford the monthly payments on the new loan. You’ll typically need a DTI ratio lower than 40%. You can lower your ratio by paying down debt from credit cards and increasing your income by getting a raise or adding a second job.

In addition to meeting these eligibility requirements, you may also have to prove that you graduated from college, live in a particular state, and are a U.S. citizen or permanent resident.

Learn More: How to Reduce Student Loan Payments

Drawbacks to refinancing

Getting a lower interest rate for your student loan debt is great, but there are two drawbacks to refinancing federal student loans.

First, you’ll lose access to federal protections like payment plans based on your income and forgiveness programs unique to loans owned by the U.S. Department of Education. Those programs include the Public Service Loan Forgiveness Program, student loan forgiveness after 20 years, and student loan disability discharge.

Second, you’ll no longer be eligible for the Covid-19 forbearance. The White House’s payment halt and interest rate freeze only apply to Education Department loans. Private loans aren’t eligible for the payment pause or the potential $10,000 student loan forgiveness.

You’ll have to begin paying the loan balance straight away if you refinance.

Learn More: Parent PLUS Loan Retirement and Forgiveness Options

Alternatives to refinancing

If you have stellar credit and can qualify for a lower interest rate than what you’re currently paying, refinancing might be a good idea for you. Keep in mind that it’s not the right move for everyone. If you don’t qualify for student loan refinancing or you want to explore other options to manage your loans, consider these repayment options:

  • Income-driven repayment plans allow you to pay back your loans based on your income and family size. After 20 or 25 years of making student loan payments, the remaining balance on your loans is forgiven. Read more about how to get student loan forgiveness after 20 years.

  • Student loan consolidation lets you combine all of your federal student loans into one loan with a manageable payment. Your interest rate is the weighted average of all the loans included in the consolidation application, so you won’t get a lower interest rate as you might through refinancing. But you’ll keep the protections — like deferment and forbearance — that come with having federal student loans.

UP NEXT: Can You Get a Discount for Paying Student Loans Early

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