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Credit Score Below 650? How to Improve It and Refinance Student Loans

Kathryn Morstad
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If you are like a lot of people, you may have student loans and a credit score below 650.

This often happens when college students have easy access to credit. As a target market for credit card companies issuing cards with higher interest rates, students apply for credit but then get behind on their payments. That can damage your overall credit score well into the future.

The problem with a score that rates as ‘fair’ or ‘poor’ is that it limits you in terms of options like getting a mortgage or refinancing your student loans. In fact, according to information released by FICO, almost 30% of Americans have credit scores at or below 650.

The good news – you can fix it!

If you have a low credit score, there are ways to fix it. And if you are considering refinancing your student loans to gain a lower interest rate or lower your monthly payments, the better your credit score — the more money you save over the life of your loan.

Instead of looking at how to refinance student loans with bad credit, let’s talk about improving your score first. To do that, we’ll start with the basics.

What is credit’s role in refinancing student loans?

Credit, and by that we mean good credit, is required in a society where a strong credit history gives you financial power. When financial lenders assess lending money to someone, they overwhelmingly use a person’s credit history as a determinant.

If you are considering refinancing student loans, understand that lenders will be looking at your past ability to meet your financial obligations and their best tool for that is your credit report.

How do I know where I stand?

First things first — you are entitled to a free credit report annually from each of the three credit agencies. This report tells you a number of things, including your actual credit score, your open credit accounts and payment history, and any inquiries that have been made recently.  Each of these things will impact your ability to refinance student loans.

How can I increase my credit score so I can refinance?

Consider these options to improve your credit report and set things is a positive direction:

  • Once you have your credit report, check for any errors or irregularities. Fixing these through each credit bureaus’ appeals process can be time consuming but is worth it in the long run.
  • Be sure to pay your bills on time. This can be the single biggest factor impacting your credit score. If you have gotten behind on payments, get caught up as quickly as possible.
  • Ask for a higher credit limit on credit cards or lines of credit. Be careful with this option! If paying credit cards has been a problem in the past, this may be inviting additional trouble. If done responsibly, this increases your outstanding-balance-to-total-credit ratio and improves the credit utilization component of your score.
  • Don’t close any credit card accounts. Closing an account lowers your available credit amount and increases your credit utilization.
  • Use any financial windfalls to quickly pay down balances, i.e., tax returns, inheritances, etc.

Is Student Loan Refinancing Right for You?

Find out how much you can save with these top lenders

Precision Pricing — Pick Your Monthly Payment

Fixed Rate:

2.50% - 5.79% APR

Variable Rate:

1.88% - 5.64% APR

Term:

5 - 20 years

Minimum Income:

No minimum

Loan Limits:

$5,000 - $500,000

Refinance Student Loans With Your Spouse

Fixed Rate:

2.89% - 5.63% APR​

Variable Rate:

Not Offered

Term:

5, 8, 12, or 15 years

Minimum Income:

No minimum

Loan Limits:

$7,500 - $300,000

efli-lender

No Maximum Loan Amount & Flexible Terms

Fixed Rate:

2.58% - 5.99% APR

Variable Rate:

2.39% - 6.01% APR

Term:

5, 7, 10, 15, or 20 years

Minimum Income:

$35,000

Loan Limits:

$15,000 - No max

Can I refinance with a creditworthy cosigner instead?

Absolutely. If you find yourself with repair work that will take time, it may be more expeditious to refinance your student loans using a cosigner. This not only helps you improve your credit while making payments but allows you to quickly gain the benefits of refinancing. Those benefits may include lowering your interest rate (saving money over the life of the loan), consolidating multiple loans into one easy payment, or lowering your monthly payments altogether.

What if I’m married?

If you’re married, consider a spousal student loan consolidation. Purefy recommends PenFed Credit Union with their refinancing opportunity that allows both spouses to consolidate all of their student loans into one package using the higher credit score.

A decision like this requires solid communication between spouses since both will be legally obligated for repayment. And if a divorce or separation occurs, both spouses will still be responsible for repayment of the loan.

How do I find out what student loan refinance rates I qualify for?

Once you have devised a plan to raise your credit score, it’s time to check out what all that financial power gets you in terms of saving money and refinancing.

There are a lot of lenders out there that want to loan you money, especially with good credit. It can be laborious to research interest rates and available terms from one company to the next.

So, Purefy developed a comparison rate tool that brings together the best lenders in the student loan marketplace and gives them a platform to compete for your business. All you have to do is fill out some basic personal information (safe and secure) so that our highly vetted lenders can develop their best loan offers based on your financial status. Best part — it’s free and there is no obligation.

Consider a one-on-one consultation

Once you have your comparison, you may want to talk with one of Purefy’s Student Loan Advisors. They can help explain the loan process, answer any questions you may have, and walk you through your options. When you schedule a consultation, have your student loan history and information available — current student loan(s) information, payment due dates, etc.

Bottom line

It’s possible to be successful at refinancing student loans with bad credit. Consider improving your credit score the fastest way possible and then land the best rate using our comparison rate tool. You’ll be flying high in no time.

Check out what our best lenders have to offer at Purefy

Compare Student Loan Refinance Rates With No Impact on Credit

Today’s Rates Starting From 1.88% APR

Compare Your Actual Prequalified Rates in 2 Minutes

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