Private Student Loan Consolidation with Bad Credit

Can I Consolidate Student Loans With Bad Credit? It Depends.

Can I Consolidate Student Loans With Bad Credit?

When researching your options of either federal consolidation or private student loan refinance, you need to know that these are two different programs. They both combine your loans into one loan, however, they have different credit considerations.

If you’re here because you want to consolidate your federal loans (no private student loans allowed) into a federal Direct Consolidation Loan then your answer is simple, most likely yes.

Student loan refinance is a great option if you are looking to potentially lower your monthly payment, annual percentage rate, or remove a cosigner (like your parent) from an existing loan. However, if you truly have bad credit and want to refinance your private and/or federal student loans, you have an obstacle to overcome. Private student loan refinance lenders will require you to meet certain credit criteria. General requirements, which vary by lender, are typically at least two-years of employment history, and a credit score of at least 680 (or the ability to obtain a cosigner).

What do you do if you want to refinance and do not meet the minimum requirements? You need to take steps to fix your credit.

  1. Review Your Credit Report

    Check your free annual credit report to determine what negative credit items could be affecting your overall score. In order to repair your credit, you’ll have to face the issues head-on. The first step is identifying and understanding the negative items on your credit report.

    If you find anything in your report which is inaccurate, don’t let it go! Credit bureaus have existing processes in place to allow consumers to dispute information on their credit report. Make sure you file a dispute requesting the removal of incorrect information.

  2. Catch Up on Missed Payments

    Do you sometimes forget to pay your bills, or do you frequently pay your bills late? Missed or late payments can have an impact on your credit report. If you are just forgetting to pay certain bills, many services and creditors will let you set up automatic payments, or you can contact your bank and enroll in bill pay.

    Find a way to catch-up, or call your creditor to set up a payment plan if it is too much for you to pay at once. You can also contact a credit counseling agency to help you negotiate debts and payments on your behalf with creditors.

  3. Find Ways to Increase Your Income

    If you’ve been struggling to stretch your paycheck to cover your bills and other living expenses, you may want to consider increasing your income. There are a few different approaches you can take.

    If you are already employed full-time, you may want to check in with your employer to see if there are any opportunities for a raise, overtime, etc. If that is not an option, you can look for part-time job opportunities, including less traditional options like rideshare, and food/package delivery which may offer more flexibility with your existing schedule.

    If you are unemployed or underemployed, start the job search. Look for opportunities which help increase your income to cover your bills. Build up your LinkedIn profile, go to professional meetups and network to help find that next great opportunity to establish or increase your income.

  4. Seek Credit Repair Help

    It can be difficult to come up with a credit repair strategy on your own, but there are credit repair companies that can help you through the process. They offer customized services, and will generally charge a fee, but it may be worth it to help get you back on track.

  5. Stick to Your Plan and Remain Patient

    When it comes to fixing bad credit, it takes time. Just be patient and know that each positive step you take will help you achieve your credit goal. Many banks offer monthly credit monitoring as a benefit or for a nominal fee. Make sure to take advantage of these programs for monthly monitoring to stay motivated and keep track of your progress. Know that it may take three to six months for you to start seeing improvements.

It may take some time for you to fix your bad credit, but the work shouldn’t stop just when your credit is fixed. Keep up the habits you formed while repairing your credit, like automatic payments and monitoring your credit report, to keep your credit healthy.

Once you think you meet the minimum requirements to refinance your loan, you can start applying!

What to do next?

Learn more about student loan repayment options

Tips for handling (and avoiding) student loan default