Student Loan Impacts to FICO® Scores

How do FICO® Scores consider student loan shopping?

The growth of the student loan industry has increased public interest in how lenders assess the credit risk of young college-bound adults. Both large and small lenders often use FICO® Scores to help them underwrite student loans. How FICO credit scoring formulas treat credit inquiries depends on the way in which those inquiries are reported by lenders to each of the three consumer reporting agencies. If the inquiries are reported by the lender in a manner that indicates rate shopping for a single loan (such as a mortgage, auto, or student loan), FICO scoring formulas typically reflect that in its calculation of a score. In general, student loan shopping inquiries made during a focused time period will have little to no impact on a score. In the rare instance in which a credit inquiry related to a student loan is not coded so that it receives our special rate-shopping inquiry logic, that inquiry typically would decrease a FICO® Score by only a few points.

What’s the best advice for people shopping for student loans to minimize the impact to their FICO® Scores?

As you’re shopping for the best student loan rate, the lenders you approach may request your credit reports or your FICO® Score (from one or more of the three consumer reporting agencies) to check your credit standing. Inquiries generally won’t affect a score if rate shopping is finished in a reasonable amount of time, which is made easier by researching rates ahead of time and deciding from which companies to get quotes. It’s advantageous for consumers to finish rate shopping and finalize a loan within 45 days. Not only will loan rates be easier to compare when the quotes come only a few days apart, but any impacts to a FICO® Score will be minimized.

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