Does Credit Affect Getting a Grant?

Grant money is money you don't have to pay back. Because you don't have to pay grants back, many people are interested in them and competition is steep. Some grants are awarded to the needy, while others are given to students and professionals to aid with career development. While some grants require you to fill out lengthy applications or meet very specific criteria, there's good news for you if you have poor credit; your ability to get a grant rarely relates to your credit history.

Business Grants

Credit certainly affects a person's ability to obtain a business loan, but it should have no bearing on obtaining a grant. Because grants have no repayment obligation, there is no need for the grantor to check your credit history -- and no incentive for them to grant money to people with good credit. When you apply for a business start-up loan using your personal credit, your own credit score does come under scrutiny. If you obtain the loan using your credit, you will be personally liable, if your business fails. If you want your business credit to be separate from your personal credit, the Entrepreneur website recommends forming a corporation or Limited Liability Corporation.

Federal Student Grants

Personal credit score has no bearing on your ability to get need-based federal student aid. Instead, your income, family's contribution and enrollment status determine your eligibility. However, if you use your Pell Grant and withdraw from school early, the government treats the funds like a debt, which may affect your credit score. When you withdraw, your school will notify you that you must repay part of your grant. If you don't repay it, or develop a payment plan in 45 days, you will no longer be eligible for Title IV Federal financial aid and the school will turn your debt over to the U.S. Department of Education.

Grant Overpayment Debts

Another example in which a grant may affect your credit, is when you receive too much grant money. For example, if the government awards you a "Teach" grant and later audits your taxes to find you earn more money than you reported, the government can require you to pay back a portion of your grant money. If you ignore this obligation, the money goes to the U.S. Department of Education for collection. A collections account will stay on your credit report for seven years, paid or unpaid. Pay back any grant overpayments to avoid this happening.

Need-Based and Personal Grants

If you are trying to obtain a grant for disaster relief, a government fellowship, a private scholarship or a grant through a non-profit organization or corporation, each has their own rules about eligibility and repayment. Generally, creditworthiness is completely separate from grant eligibility -- and these types of grants rarely require repayment. Instead, to increase your likelihood of obtaining these grants, focus on the grant's eligibility rules. Don't waste time applying for a grant for which you won't qualify. Hire a professional grant application writer to boost your odds of beating the competition. Apply for local, less competitive grants to increase your chance of receiving a grant award.