Comparing loans and your credit score: what you need to know
It turns out that comparing different student loan options doesn’t have as negative an impact on your credit score as was previously feared. Recently, Fair Isaac, the company behind the industry standard credit score (called "FICO Score") released clarification on how applying for student loans impacts your credit score.
Many student borrowers investigate their private student loan options by applying to multiple lenders. This helps them understand which lenders will approve their application - and the rate / fee combination that each lender will offer them based on their specific credit profile. For these reasons it has always been fairly commonplace for borrowers to complete multiple loan applications as part of their shopping process. However, there has long been concern that multiple applications could result in a negative impact on an applicant's credit score.
Fair Isaac has recently stated that, so long as these multiple applications take place within a compact period of time (30 days), an applicant should see minimal impact on their credit score.
This is good news for borrowers (and their co-signers, who also are party to private student loan applications). Now they can shop with greater confidence. Nonetheless, it is important to understand that applying for any kind of credit can impact your credit profile. You can read more about Fair Isaac's statement at the website of the National Association of Student Financial Aid Administrators.
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