Will it Hurt My Credit if I Apply for the FAFSA®?

Were you and your parents in the process of applying for the Free Application for Federal Student Aid (FAFSA®), and stopped halfway to question whether applying for FAFSA® will hurt your credit score? If so, when applying for financial aid there’s many things to keep in consideration, especially when applying for FAFSA® will impact your life. However, filing your FAFSA® will not impact your credit score.

In fact, the grants and scholarships you receive from FAFSA® is money you don’t have to pay back. Since most of the federal aid you will receive is need-based, FAFSA® does not check your credit report or rating. FAFSA® ask for your income information and not whether you paid your bills on time.

What’s the Difference Between Federal and Private Loans?

The only time your credit will be checked is if you’re applying for private student loans, refinancing a student loan, or you fall behind on your student loan payments, and cases where your current lender, such as Sallie Mae, wants to review your credit report.  The majority of federal student aid is not dependent on your or your parents credit history, including the student loan debt your parent may have. However, it might be difficult for your parents to receive a PLUS Loan or qualify as a cosigner for a private loan if they don’t have a positive credit score. You don’t need a credit check to receive Federal Student Loans unless you’re applying for PLUS Loans.

You may wonder if your FAFSA® information is shared with the lenders, such as your private student loan lenders. The answer is No. Private loan lenders don’t have access to your FAFSA® information. The only platforms that have access to your information are the schools you included in your FAFSA®, fafsa.ed.gov and studentloans.gov. The U.S Department of Education secures the information you share on fafsa.ed.gov and studentloans.gov through a process called encryption. The process uses a mathematical formula to give students information a random format that makes it unreadable to hackers.

In most cases, students choose to apply for federal loans before private loans because Federal Student Loans have a fixed interest rate, and often have a lower interest rate than private loans and some credit cards. Indeed, federal Student Loans can help you establish a good credit record.