College students have been encouraged to “shop around” for student loans. Now, it appears that doing so could damage their credit score.
The New York Times declares: “Since lenders quote higher interest rates to applicants with lower scores, some students could end up paying thousands of dollars more in interest over the life of their loans.” The Times goes on to note: “Mortgage and auto loan seekers who comparison shop within a relatively short period of time do not see their credit scores suffer. But Fair Isaac, the company that helps credit bureaus calculate credit scores, does not extend the same break to private student loan applicants or their parents, who often co-sign for loans.”
The New York State Attorney General’s office has asked Fair Isaac to treat student loan borrowers like car and home shoppers. So far, according to the Times, Fair Isaac has refused to change its policy.
Fair Isaac administers the popular FICO score, which is based on formulas that assume that multiple inquiries within a short period of time indicate that the potential borrower is financially troubled or may even be going bankrupt.
Not many people shopped around for the best rate before the student loan scandals erupted, the Times observes. Accordingly, Fair Isaac states that it does not have a sufficient database of private student loan data to mine.
Fair Isaac does not believe that any damage occurs most of the time. According to Experian, one of the three major credit bureaus, a small drop in credit score is possible.
source : http://www.google.com/news?
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