InvestorQ : Is credit score important in case of education loan?
Nitin Shah made post

Is credit score important in case of education loan?

Anusha Savla answered.
2 years ago

This is a very valid question. But before answering it, let’s first understand what a credit score is.

A credit score is a three-digit number that gives information on your credit-repaying history. This score, a part of a credit report, gives banks and non-banking financial companies (NBFCs) an idea about whether a borrower is likely to repay his/her debt or not. This is why a credit score is one of the most important prerequisites for lending to customers.

An individual who has a good credit score is more likely to get a loan vis-à-vis a person with a bad credit score. Banks and other non-banking finance companies prefer giving loans to individuals with a good credit score. The reason for this is that they want to ensure they give money to an individual who is more likely to repay the loaned amount. A good credit score is a reflection of an individual’s repayment track record.

A majority of students applying for an education loan do not have previous credit history such as other loans or credit cards.

Thus, education loan specialized lenders have a specialized credit-scoring model that scores education loan application based on the University, College and the Course of admission. They factor the academic background of the student as well as the credit history of the co-borrower into their decision.

This way students can get education loans even if they don’t have credit history or credit scores.