Many alternative education loans require a credit check.  But what exactly does this mean?  It means lenders look at your financial history to first determine if they can approve you for a loan, and then decide on the terms they can offer you.

Credit Bureaus - All of the banks, lenders and credit card companies you have relationships with send information to three national credit bureaus (Experion, Equifax, and TransUnion).

Credit Reports - The credit bureaus compile credit reports with your account information, balances, and payment histories.

Credit Scores - Credit reports contain lots of information, so each bureau uses that information to calculate a credit score that represents how well you have handled credit in the past.

Credit Check - When you apply for an alternative loan, the lender looks at your credit score, which ranges from 300 (low) to 850 (high), to quickly determine if they can lend you money and expect to be paid back.

Alternative Loans - Provided your credit score is high enough, the lender approves you for an alternative loan.  Your credit score can also play a role in the terms and conditions offered, as the lender may offer a lower interest rate or lower fees to borrowers with good scores.

©2005 Great Lakes Educational Loan Services, Inc.  All rights reserved.

More information on credit, credit cards and debt management can be found in our Managing Your Money section.