Does Bad Credit Affect My Chances of Getting Financial Aid?

Bad credit can prevent you from getting a job or a loan, but it probably has no effect on your financial aid package. It can affect your ability to acquire some aid, but the financial aid that depends on a credit check usually is not something you want to use to pay for college. In some cases, your credit history can increase your aid package.

Loans

The most common way that bad credit affects your financial aid package is private student loans. Private lenders probably won't offer you loans if you or your parents have a credit score rating of 620 or below, according to FinAid.org. The only federal loan award that depends on a credit check is the parental PLUS loan. Even then, the loan people only look for derogatory items, such as bankruptcy, collection accounts and judgments, not your numerical rating.

Professional Judgment

If your financial package does not meet your needs and you think you deserve extra aid, ask the financial aid office for a professional judgment. The director of the financial aid office can consider items such as bankruptcy that might appear on your credit history but that do not factor into the Federal Application for Student Aid. For example, if you recently went through bankruptcy -- the worst item on a credit report -- due to unemployment, the director might adjust your income downward.

Bad Credit and PLUS Loans

The financial aid office can increase the student's unsubsidized Stafford loan limit if his parents cannot obtain a PLUS loan. Students and parents often prefer this option because the unsubsidized Stafford loan usually has a lower interest rate. You might qualify for a PLUS even with bad credit if you can prove that your low score is due to extenuating circumstances, such as medical bills.

Tip

When you cannot find any type of financial aid other than private loans and the PLUS loan and have bad credit, you can have someone with a good credit history co-sign your account. Ideally, you should consult a financial aid officer as soon as possible. For example, lenders often allow institutions to approve private loans based on need rather than the student or parent's credit rating.