Does Applying for Student Loans Hurt Your Credit?

Applying for most types of loans and credit cards can hurt your credit score a little, because the lenders run a credit check when evaluating your application. However, only some types of student loan applications affect your credit score, because some student loan offers are not based on credit history.

Credit Inquiries

Applying for any type of loan, including a student loan, can hurt your credit if the application generates an inquiry on your credit report. An inquiry is a notation of each creditor who checks your credit report or credit score. Inquiries do not hurt your credit score if they are not related to a credit application, such as when you check your own credit or an employer checks your credit. However, inquiries resulting from student loan applications can hurt your credit. Each inquiry usually drops your score by five points or less, according to the MyFICO website. However, if you have a thin credit file, the inquiries could have a more significant effect.

Federal Student Loans

Applying for Perkins loans, subsidized Stafford loans and unsubsidized Stafford loans does not affect your credit rating. These types of federal student loans do not require a credit check because the federal government makes them available to all students, regardless of credit history. The only credit-related item that can affect getting one of these loans is a default on a previous federal loan that remains unresolved. Because the federal government never runs a credit check on you, your application will not hurt your credit score.

PLUS Loan

If you are a graduate student, you can apply for a federal government-issued PLUS loan to help finance your education. These loans require that you not have an adverse credit history, which includes payments more than 90 days late, bankruptcies and court judgments against you. Therefore, when you apply for a PLUS loan, the government will check your credit report to ensure you qualify. This will generate one credit inquiry on your report, which can hurt your credit score slightly.

Private Student Loans

Private lenders check your credit to determine whether they are willing to lend money to you in the form of student loans. Many lenders require that a student have a co-signer with a good credit history, because the student may not have enough credit history. The application generates an inquiry on both the student's credit report and the co-signer's credit report. If you are applying for student loans with multiple lenders to compare interest rates, submit all applications within a two-week period. That way, the multiple inquiries are counted as just one inquiry by the credit-scoring formula, which recognizes you are shopping for a single loan.