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Credit Score Needed to Refinance Student Loans: Here's What You Should Know

Credit Score Needed to Refinance Student Loans: Here's What You Should Know
Rebecca Safier
Rebecca SafierUpdated August 3, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
From saving you money on interest to streamlining debt repayment, refinancing your student loans can come with several benefits. But before you can qualify, lenders look at your credit to assess your risk as a borrower. Most lenders require good or excellent credit (i.e., a score of 670 or higher) before approving you for a refinanced student loan. If your credit score is lower than 670, you might still have options. Some lenders will accept a lower score, while others let you apply with a cosigner to boost your chances of approval. Let’s take a closer look at the credit score needed to refinance student loans, starting with how a credit score works. 

What Is a Credit Score?  

A credit score is a number between 300 and 850 that lenders look at in order to assess your risk as a borrower. The higher your score, the more confident a lender feels that you’ll pay back a loan. A high credit score not only increases your chances of getting approved for a loan, but it can also help you qualify for the lowest interest rates. There are several types of credit scoring models, but two of the most popular are FICO and VantageScore. When determining your score, these agencies rely on data such as: 
  • Your payment history 
  • The amount of debt you owe 
  • Your credit utilization ratio
  • How many loans and credit cards you have 
  • The age of your accounts 
Behaviors such as on-time payments on debt will increase your credit score, while defaults, collections, or bankruptcies will damage your score. You may also be wondering, does refinancing student loans hurt your credit?While your credit score is not the only factor that lenders look at when evaluating your application to refinance your student loans, it is a major one.  

What Credit Score Is Needed to Refinance Student Loans?

Every lender sets its own credit score requirements for student loan refinancing, but most look for good to excellent credit. In the FICO scoring model, a good credit score starts at 670. For VantageScores, a good credit score means a minimum of 661. Some lenders, however, will consider you with a lower score. If you’re pursuing student loan refinancing, it’s a good idea to shop around and compare multiple options. Even if one lender rejects your application, another might have more forgiving criteria. That said, you might not qualify for competitive rates with subpar credit. To get better rates, it might be worth taking steps to improve your credit before you apply. Alternatively, you might be able to apply with a cosigner showing excellent credit. 

What Are the Other Eligibility Requirements for Loan Refinancing? 

While your credit score is an important piece of your student loan refinancing application, it’s not the only one. Here are some other eligibility requirements to keep in mind. 

Previous On-Time Student Loan Payments 

Most refinancing lenders want to see that your existing student loans are in good standing. That means that you’ve been making your payments on time and in full. If your loans are in default, you’re less likely to qualify for refinancing. Defaulting on student loans can also significantly damage your credit, further hurting your chances of qualifying for refinancing.  

Stable Source of Income 

Most lenders look at your income along with examining your credit score to ensure you’ll be able to pay back your loan. If your income is too low or unstable, a lender may see you as a risky candidate and reject your student loan refinancing application. 

Minimal Debt-to-Income (DTI) Ratio 

Your DTI ratio, or the amount of debt you owe in comparison to your income, also plays a role. If your DTI ratio is high, a lender may think you won’t be able to afford your refinanced student loan payments. To determine your DTI ratio, add up your monthly debts (rent payments, student loans, credit card payments, etc.) and divide that number by your total monthly income. If your debts total $2,000 and your monthly income is $4,000, for example, your DTI is 50%. Typically, lenders like to see a DTI ratio of 35% or lower, though requirements can vary. If your DTI is higher, consider paying down some of your debts before applying to refinance your student loans. 

Proof of Graduation 

Many lenders ask for proof of graduation as part of their refinancing requirements. You’ll need to show that you earned the degree for which you borrowed your student loans. If you didn’t graduate, however, you might still have options for refinancing without a degree. Some lenders offer loans to borrowers who didn’t earn their degree, though they might impose some extra requirements, such as a certain period of on-time student loan payments before applying. 

Considering What Impacts Your Credit Score 

By understanding what impacts your credit score, you can take steps to improve it. While you won’t be able to fix a bad credit score overnight, you can make significant improvements over the course of six months to a year and have a credit score to refinance student loans.

Paying Bills on Time 

Making on-time payments on your loans and credit cards is one of the biggest influences on your credit. In the FICO credit scoring model, payment history makes up 35% of your credit score. If you’re looking to improve your score, make sure to pay all bills by the due date.If you already have missed payments or collections on your credit report, consider resolving these issues before applying to refinance your student loans. 

Staying Within Your Credit Limits

Part of your credit score also depends on your credit utilization ratio, or the amount of credit you’re using compared to the total credit available to you. If you’re maxing out your credit cards every month, your credit utilization will be high and your credit score will suffer. It’s generally a good practice to keep your credit utilization ratio at 30% or lower. If you have $10,000 in available credit, for example, that means using $3,000 or less at any given time. Paying off your credit cards in full every month will help keep your credit utilization low and provide you with a credit score to refinance student loans. Plus, this habit will help you avoid the high interest charges that come with carrying a balance. 

Applying for New Credit 

In the FICO scoring model, 10% of your score is based on “new credit.” While maintaining a mix of credit can boost your score, opening too many accounts at once can bring it down. When you apply for new credit, lenders typically perform a hard credit inquiry, which can ding your score. Trying to open lots of new accounts at once could look risky to a lender and hurt your chances of qualifying for student loan refinancing. When you are shopping for a loan, it’s typically a good idea to apply within a 14- to 45-day window so that any hard credit checks are treated as a single inquiry. 

Ways to Refinance Your Student Loan Despite Bad Credit 

One of the disadvantages of refinancing student loans is that you typically need strong credit to get the lowest rates. However, a low credit score doesn’t necessarily mean you can’t refinance your student loans. It’s sometimes possible to refinance with bad credit. If your credit score is less than stellar, you might still have options. 

Compare Lenders 

Don’t assume that getting denied by one lender means you won’t qualify anywhere. Every lender sets its own borrowing criteria, so the credit score needed to refinance student loans with one lender might be different from the credit score needed by another. 

Consider What Impacts Your Credit Score 

A bad credit score doesn’t have to stay that way. If you want to improve your score, a good starting point is ordering a free copy of your credit report from AnnualCreditReport.com. While this report won’t contain your score, it will give you a birds-eye view of your various accounts. If you see any late payments or collections accounts, you can take steps to get the accounts back in good standing. And if you spot any mistakes, you might be able to dispute them and have them removed. Once you understand what’s dragging down your score, you can take steps to improve it before applying for student loan refinancing. 

Apply With a Cosigner 

Some lenders will let you apply with a cosigner to boost your chances of approval. Note that your cosigner will become equally responsible for the loan, and that person’s credit could suffer if you miss payments. Plus, your cosigner would be on the hook for paying back your debt in the event that you default. 

Get the Lowest Student Loan Refinance Rate With Lantern 

When refinancing your student loans, shopping around is key. Lantern by SoFi makes it easy to compare offers from multiple lenders at once with no impact on your credit. Learn more about how to compare student loan refinance options. 

Frequently Asked Questions

What is the minimum credit score needed to refinance student loans?
Can you refinance student loans with bad credit?
What do I do if I don’t meet the requirements for student loan refinancing?
Photo credit: iStock/RapidEye
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About the Author

Rebecca Safier

Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
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