13 Tips for Improving Your Credit Score to Get the Best Rate on a Student Loan

In the 2022-2023 school year, 41% of American families did some type of borrowing to afford their child’s college education. So, if student loans will be a piece of your family’s financial aid picture, you’re not alone. Just keep in mind that interest charges mean loans can come at a high cost

To avoid too much student loan debt, it’s important to shop around for loans with lower interest rates. Federal student loans offer fixed interest rates, which are the same for every borrower (except for parent PLUS loans) for the life of the loan. 

Private student loan interest rates, on the other hand, are based on the borrower’s credit score1. The general rule is the higher your credit score, the lower your interest rate. And generally, you can improve your credit score by making on-time payments or hurt your credit score by missing payments or taking on too much debt for your income level.

Whether you’re a cosigner, a parent, or a student looking for a private student loan, these 13 tips will help you improve your credit score, access lower rates, and get the best student loan available to you.

1. Review your credit report (it’s free)

Before you can improve your credit score, you need to know what it is. Checking your own credit score counts as a soft inquiry, which won’t negatively impact your credit. 

Every American is entitled to one free credit report from each credit bureau (TransUnion, Experian, and Equifax) per year, so get in the habit of reviewing your credit history regardless of your financial situation. You can decide to request reports from all 3 at once, or spread out the requests from each bureau across the year, so you can check a credit report once every few months. 

You’ll want to make sure you understand what, if anything, has hurt your credit. And take note of anything that looks wrong because you can correct it, which leads us to Tip #2 below.

2. Dispute errors on your credit report (if relevant)

According to a recent study, more than a third of consumers found at least one error on their credit report. Errors can happen in simple ways — like when there are two account holders with similar names. But errors can also be a sign of something more nefarious, like identity theft. When you review your credit report, make sure you’re looking closely for signs of suspicious activity.

To dispute an error, contact both the company that provided the credit report as well as the company that reported the error. For example, if the error is a previously paid medical bill that showed up on an Equifax credit report, submit a dispute to Equifax and to the hospital that charged for services. In your dispute, identify the error, explain why the information is incorrect, and provide supporting documentation as proof, like copies of receipts, bills, etc. 

3. Become an authorized user

Becoming an authorized user on an existing account with good to excellent credit can help you build credit without risk. An authorized user piggybacks off the good credit of the primary account holder but is not responsible for monthly payments. Adding an authorized user is usually free or comes with a minimal fee

Adding users who can spend freely with their card might spook some primary account holders. However, this credit-building strategy works even if authorized users don’t spend any money. Before you take this step, agree with your prospective primary account holder on exactly how much (or how little) you can spend on their account. For hesitant parents who want to help their children build credit, use this opportunity to set boundaries and build trust. 

4. Get a secured credit card

If you have a low credit score, or none at all, opening a secured credit card can help. To get a secured credit card, you’ll put down a cash deposit, which acts as proof that you can afford the money you’ll spend. This cash deposit then becomes your credit limit. For example, if you put down $5,000, your credit limit will be $5,000. 

Other than this deposit and corresponding credit limit, secured credit cards function almost identically to regular, unsecured credit cards. You’ll have access to perks and be able to use the card just like any other. 

5. Pay bills on time 

The largest contributing factor to your credit score, weighted at 35%, is whether or not you make on-time payments. Maintain healthy credit by paying your monthly bills on or before their due date — and ensure you’re able to do so by spending within your means. 

If you have a current student loan from the federal government and are having a hard time making your monthly payments, find a repayment option that keeps you on track. The standard repayment plan might not work if you’re just out of college and not making much money. Explore income-driven repayment plans to prevent you from missing payments. 

Autopay can be a lifesaver if remembering to pay your bill is half the battle. Most credit cards and student loan servicers support automatic payments, and some even offer autopay discounts. Link your bank account, customize your autopay amount, and never miss another payment. 

6. Use less of your available credit 

Another factor that makes up a hefty portion of your credit score (30%) is your credit utilization rate. This number represents how much money you owe relative to your credit limit. The more you owe, the higher your credit utilization rate. If it’s too high, it can negatively impact your credit score. Most experts recommend that consumers keep their credit utilization rate at or below 30%. For example, if your credit limit is $10,000, don’t let your credit card balance creep above $3,000. Better yet, pay off your credit card bill in full each month

7. Ask for a credit limit increase 

If you’re consistently exceeding 30% of your credit limit or have a large purchase coming up, check your eligibility for a credit limit increase. The limit is initially based on your credit score, income, and a few other factors. But over time, many lenders will offer credit limit increases to good customers. 

If necessary, request a credit limit increase via your credit card’s online portal or by calling customer service. You’re more likely to be approved if you can prove an increase in your monthly income, have a history of on-time payments, and aren’t carrying large balances on other credit cards. 

Keep in mind that applying for a credit limit increase usually results in your lender making a “hard inquiry” on your credit. A hard inquiry occurs whenever a lender (like a private student loan provider or credit card company) pulls your credit history. Each time a hard inquiry happens, your credit score is temporarily lowered by a few points. But in the long run, a credit limit increase should boost your credit score by lowering your credit utilization rate. 

8. Keep old accounts open 

This might seem counterintuitive, but it makes sense if you approach it from a lender’s perspective. When considering applicants for a credit card or new loan, the lender wants to ensure that their prospective borrower has a history of managing credit and making payments. So, the longer your positive track record is, the more comfortable a lender feels lending to you. 

The length of your credit history is weighted at 15% in your overall credit score. If you can, keep your old accounts open even if you’re not actively using them.  

Moreover, by keeping old accounts open, you’ll likely use less of your available credit (tip #6). 

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9. Use a credit-boosting service 

Building credit can seem like a long and complicated process. Thankfully, credit-boosting services exist to give you an instant leg up. The most well-known, Experian Boost, is offered by one of the three primary consumer credit reporting companies (but it’s not the only one). 

Experian Boost is a free service that gives consumers credit for making on-time payments for qualifying bills like utilities, rent, gas, internet, and even streaming services. When you sign up, you won’t just get credit for paying these bills on time in the future –– you may also see a small, instant increase in your credit score for paying them on time in the past. 

10. Add variety to your credit mix 

Improve your credit score by injecting some diversity into the type of borrowing you do. Credit mix makes up 10% of your credit score. There are four different types of credit you’ll find on a typical credit report: installment loans (i.e. student loans), revolving debt (i.e. credit cards), mortgage accounts, and open accounts (i.e. a charge card where you’re required to pay the balance in full each month). 

If you want a low-risk way to add to your credit mix, consider taking out a credit-builder loan. These are designed for borrowers with little to no credit and function differently from traditional loans. With a traditional loan, you get a specified amount of money upfront and then pay it back with interest over time. With a credit-builder loan, you agree to a specific amount of money, then make monthly payments with interest before you receive the money. Once you’ve made all of your monthly payments (which are reported to credit bureaus), you’ll receive the loan funds. Typically, credit-builder loans are only offered in small amounts, like $300 to $1,000

11. Avoid opening too many accounts at once

Hard inquiries also happen when you apply for a new line of credit, like a credit card, for example. While it might be tempting to take advantage of sign-up bonuses, it’s a good idea to have no more than two or three credit cards at the same time. And if possible, don’t open those accounts in the same year to avoid multiple hard inquiries. 

New credit inquiries account for 10% of your overall credit score. Even though that might not seem like much, several hard inquiries on your account can do significant damage to your credit. If you’re opening your first credit card and worried about the impact on your credit, know that most hard inquiries are visible on your credit report for two years, but should only impact your score for one

With different types of loans, like home loans or student loan refinances, there’s a shopping period where multiple loan applications only result in one hard inquiry to your credit report. If you’re comparing student loan rates or other private loans, complete all applications in this timeframe (usually 14-60 days) to avoid multiple hard inquiries to your credit. Unfortunately, comparing rates on credit cards does not fall under the rate-shopping exception. 

12. Pay off other debt 

Boost your credit score by paying off debt when you can. There are two popular debt repayment strategies: the avalanche method and the snowball method. With both, you’ll focus on paying off one debt at a time while making minimum payments on all the others. The difference between these strategies is the type of debt you focus on. 

  • With the avalanche method, divert any extra cash you can to tackle your high-interest debt first. By focusing on interest rates, you could end up paying less in total interest over time. The downside of this technique is that it requires a lot of focus and discipline. If refinancing your debt at a lower interest rate is an option, it might be a good idea to explore as well. 
  • With the snowball method, your extra funds will go toward paying off your smallest balances first. Once you zero out one loan balance, you’ll move on to the next smallest loan balance. Paying off debts, even if they’re small, can give you a psychological boost to keep moving forward. The downside of this technique is that it may result in you paying more in interest on other loans. If you have lots of smaller debts and your monthly payments are a hassle, consider loan consolidation to bring them all under one umbrella with one monthly payment. 

If you agreed to cosign a loan for a dependent who’s since shown an ability to handle the loan independently, removing yourself as a cosigner is another way to get debt off your credit history. See if your lender offers a path to cosigner release. Or, you can always ask the borrower to refinance their loan without a cosigner

13. Consolidate or refinance existing student loans

If you’re already a student loan borrower –– whether you’ve borrowed for yourself or on behalf of a dependent –– student loan repayment will have a major impact on your credit score. Depending on your loan amount, consolidation or refinancing could simplify your monthly student loan payments and lower your interest rates. 

Student loan consolidation, which is only an option for loans from the federal government, bundles existing federal loans into one new loan. You’ll have one monthly payment and retain access to federal protections like student loan forgiveness, income-driven repayment, forbearance, and deferment. Consolidation also allows borrowers to convert any variable-rate loans into fixed-rate loans. 

Keep in mind, however, that any outstanding interest on your consolidated loans is capitalized (added to the principal). So depending on your repayment plan and loan term, you could end up paying more in total interest. 

When you refinance student loans2, you take out a new loan with a private lender to pay off your old loans. Your new loan will have new terms and, if your financial situation has improved (better credit score, DTI, income) since you took out your original loan, may have a lower interest rate as well. This can result in you saving thousands in interest charges over the life of your loan3. At the same time, it also means giving up access to student loan protections like forgiveness, income-driven repayment, and potentially deferment and forbearance. 

Shop different student loan refinance lenders to find the best repayment terms and lowest interest rates. (But you might want to start with our partner Earnest.) If you already have another bank account or loan with one lender, you might even be eligible for a loyalty discount if you refinance with the same financial institution.  

Pay less for college with Going Merry

Securing the lowest possible interest rate on a student loan can help you save a significant amount of money over time. Use the above strategies to boost your credit score, and then shop around for the best student loan for your financial situation. You can start with our partner Earnest and its Rate Match Guarantee.

How else can you afford college? Sign up for Going Merry to guide you through it all. We offer several tools and services, including:

  • Win scholarships to avoid taking on student loan debt in the first place. Through Going Merry, you get access to thousands of high-quality scholarships matched specifically to your profile.
  • Complete the FAFSA® and get access to additional aid and government grants.
  • Understand your college financial aid offer or compare multiple offers. We’ll break down how to read your financial aid award letter– and even estimate your future debt, compared to the average post-graduation salaries from your college.

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Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

1 Before applying for private student loans, it’s best to maximize your other sources of financial aid first.  It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grant, and work-study opportunities.  2) Next, fill out a FAFSA(R) form to apply for federal student loans.  Federal Direct subsidized and unsubsidized loans, excluding PLUS Loan for Parents and PLUS Loan for Graduate and Professional Students which require a credit check and a credit worthy endorser if the parent or graduate or professional student has adverse credit, do not require a credit check or cosigner, and offer various protections if your struggling with your payments.  3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2.  For more information, visit the Department of Education website at https://studentaid.ed.gov.

2 You may lose benefits associated with your underlying federal and/or private loans if you refinance such as federal Income-driven Repayment Plans, Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options. If you file for bankruptcy, you may still be required to pay back this loan.

3 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.

Earnest Private Student Loans are made by One American Bank, Member FDIC, or FinWise Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Finwise Bank, 756 East Winchester, Suite 100, Murray, UT 84107.

Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank, FinWise Bank, and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America. 

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