Considering a Private Student Loan
Question: I will be applying for a private student loan within the next few months and want to be assured approval. I have little credit history and no one to co-sign with me. I have one credit card which I started using in June. Will four more months of using this one credit card be enough to give me a decent enough credit score to be approved for a private student loan?
Answer: Building your credit history (and an acceptable credit score) can take time. The good news is that you have started!
Private Student Loans are specialized education loans that are based on your credit history and income. You should only consider this option after all federal loans, grants and scholarships have been exhausted. Lenders typically give better loan terms for better credit history.
For a private student loan, StaffordLoan.com recommends having about 27 months of credit history. If you are concerned about being approved you might want to consider looking at financial aid programs or alternative student loan products. Sallie Mae and StaffordLoan.com both offer great information on various student loan products. As always, you can also contact the financial aid office of the college you are attending.
You mentioned that you have one credit card that you have been using since June. In order for you to build a positive history, it is extremely important that you keep in mind a couple of key points:
ALWAYS make your payment on time — the largest part of your credit score (35%) is based on nothing but your payment history. A late payment can cause a significant negative downturn of your score (not to mention a hefty Late Payment Fee!).
NEVER use more than 35% of your available credit. For example, if your card has a $1000 credit limit, never carry a balance of more than $350. Even better, pay the balance in full every month. Using more than 35% of your limit can damage your score.
By Steve Axtell
Published Sep 15, 2008.