We get this question a lot. It’s nice to know that some borrowers and cosigners are concerned about the impact applying to multiple student loans may have on their credit. After all, our good credit allows us to finance important big ticket items like cars and homes and receive better rates on things like car insurance and credit cards. And, as anyone who has reviewed their credit score after applying for a loan can tell you, your score does decrease somewhat based on how recent the inquiry is. Whether it’s an auto loan or a student loan, credit scores are affected by inquiries. Fair Isaac, the company behind the FICO score, has a pretty good explanation about how borrowers should approach the problem and we’ll try to break it down here.
According to Fair Isaac, multiple inquiries for student loans over a period of no more than 45 days will have the same impact as a single inquiry. Your credit score may or may not be impacted by a single credit inquiry and depends mainly on your the characteristics of your credit profile. When calculating your score, the important distinction is whether you are “rate shopping” or opening multiple new lines of credit. The way in which they determine this important difference is to look at the time frame in which the inquiries occur. If they are spread over a longer period of time, it may appear that the purpose of the inquiries is to open multiple accounts. If the inquiries occur over a relatively short period of time, it will look more like shopping for the best rate.
When comparing your private student loan options on our site, you may be tempted to go with the lender that offers the lowest “as low as” rate. If you and your cosigner have excellent credit, that may be good enough. However, if you are unsure, you should apply for multiple student loans to compare the final rates and terms offered by the lenders from which you receive approvals.
To ensure the impact on credit scores is kept to a minimum, Fair Isaac recommends doing your rate shopping over a concentrated period of time. While they recommend doing this over no more than a 45 day period, it would be better to be on the safe side and complete your applications as closely together as you can. Since most undergraduate and many graduate student borrowers will need a cosigner in order to be approved for a private student loan, it will be important to coordinate closely with the cosigner to ensure both the borrower and cosigner complete their portions of the student loan application in a timely manner.
Shopping for the best rates is what we’re all about here at eStudentLoan. Compare your student loan options and select one or more loan programs. When you are ready, coordinate with your cosigner during the application process and rest easy knowing your credit score won’t take a hit that’s out of proportion to a normal credit inquiry.