Does the FAFSA Check Your Credit Score?

The FAFSA is the primary application for federal student financial assistance. This application helps determine a student’s eligibility for various forms of aid, including grants, scholarships, work-study programs, and federal student loans.

The FAFSA and Credit Scores

The FAFSA itself does not involve a credit check for the student or their parents. Submitting the FAFSA form will not impact a credit score, nor will it appear on a credit report as a credit inquiry. This application is an assessment of financial need, not an evaluation of creditworthiness for a loan. Federal student aid programs are designed to be accessible to a wide range of students, regardless of their credit history. Therefore, a student or parent with limited or poor credit history can still complete the FAFSA and qualify for various federal aid options.

What FAFSA Does Consider

The FAFSA evaluates several financial factors to determine a student’s eligibility and the amount of federal aid they may receive. These factors primarily include the student’s income and assets, and for dependent students, the income and assets of their parents. The application also considers household size and the number of family members attending college, although the latter has seen changes in its impact with recent FAFSA simplifications.

The information submitted on the FAFSA is used to calculate the Student Aid Index (SAI), which replaced the Expected Family Contribution (EFC) starting with the 2024-2025 award year. It represents an index of financial strength and is not the amount a family is expected to pay. A lower SAI indicates a greater financial need, increasing the likelihood of qualifying for need-based aid.

Assets considered on the FAFSA include cash, savings, checking account balances, and the net worth of investments like stocks, bonds, mutual funds, and real estate (excluding the primary residence). Assets held in a student’s name are typically assessed at a higher percentage than those in a parent’s name. Certain assets, such as retirement plans (e.g., 401(k)s, IRAs) and the equity in a primary residence, are generally not included in the FAFSA calculation. The SAI is ultimately used in conjunction with the college’s Cost of Attendance (COA) to determine a student’s financial need. The COA encompasses tuition, fees, room and board, books, supplies, and other living expenses.

Federal Student Loans and Credit

While the FAFSA application itself does not involve a credit check, certain federal student loans do have credit-related requirements. Most federal student loans, such as Direct Subsidized and Unsubsidized Loans, do not require a credit check for the student. This feature makes these loans accessible to students who may not have an established credit history.

An exception to this rule is the Direct PLUS Loan program, which includes Parent PLUS Loans for undergraduate students and and Direct PLUS Loans for graduate or professional students. These loans require a credit check to screen for an “adverse credit history” of the borrower. An adverse credit history is not a traditional credit score assessment, but rather a review for specific negative financial events.

These events can include having debts totaling more than $2,085 that are 90 or more days delinquent, or debts placed in collection or charged off within the past two years. It also includes more severe events within the last five years, such as bankruptcy discharge, foreclosure, tax liens, wage garnishments, or a write-off of federal student aid debt. If an adverse credit history is found, a borrower may still qualify by obtaining an endorser (similar to a co-signer) who does not have such a history, or by documenting extenuating circumstances.

Private Student Loans and Credit

Private student loans differ significantly from federal student aid programs, as they are offered by banks, credit unions, and other private lending institutions. These loans are not part of the federal financial aid system and do not use the FAFSA for eligibility determination. Instead, private lenders always conduct a traditional credit check to assess the borrower’s creditworthiness.

Private lenders evaluate credit scores and credit history to determine loan approval, interest rates, and other loan terms. A strong credit score, generally considered to be at least in the mid-600s or higher, can improve the chances of approval and lead to more favorable interest rates. Given that many students have limited or no credit history, private student loans often require a co-signer with established good credit. The co-signer’s credit history and income are crucial in the approval process, as they share responsibility for the loan repayment.