Tag: Credit Score

  • Why Did My Credit Score Drop for No Reason? (7 Real Reasons Most People Miss)


    There is nothing worse than working so hard to boost your credit score, only to finally check your credit report, expecting it to go up… and instead it drops.


    No missed payments. No big purchases. Nothing crazy.


    So what gives?


    We know it kind of sucks, but here’s the hard: your credit score almost never drops “for no reason.” But the reasons are often invisible if you don’t know where to look. Most of the time, it comes down to timing, small shifts in your credit profile, or rules no one ever clearly explained.


    Let’s have a real tete-a-tete about what’s actually going on.

    Your Credit Utilization Spiked (Even If You Paid It Off)


    The most common reason your score drops unexpectedly is almost certainly a spike in your credit utilization, which is how much of your available credit you’re using at any given time.

    Even if you pay your balance off in full every month, your card issuer may report your balance before your payment goes through. That means your report could show a higher balance than you actually carry.


    So if you put a large expense on your card and paid it off shortly after, your score can still take a temporary hit. The system is reacting to what was reported—not what you intended.


    The best way to avoid this is to keep your utilization low before your statement closes, ideally under 30% and even better under 10%. Paying attention to statement dates can make all the difference here.


    You Paid Off a Loan (Yes, Really)


    This one feels counterintuitive, but paying off a loan can sometimes cause your credit score to dip. When a loan is closed, it can slightly change your credit mix and reduce the number of active accounts on your profile. In some cases, it can also impact the average age of your accounts.


    The drop is usually just small and temporary, but it can catch people off guard because it feels like you’re being punished for doing the right thing. In reality, your score is simply adjusting to a new credit profile—and it typically bounces back within a few months.


    You Closed a Credit Card


    Closing a credit card might seem like a responsible move, especially if you’re trying to simplify your finances. But it actually can have a negative effect and lower your score by reducing your total available credit.

    When that happens, your utilization ratio increases—because the percentage of available credit has dropped— even if your spending stays exactly the same.


    For example, if you had $10,000 in available credit and closed a card that brought you down to $5,000, your usage suddenly looks much higher to lenders. That shift alone can trigger a drop in your score.


    Keeping older accounts open, even if you rarely use them, can help utilization rates and help you maintain a stronger credit profile over time.


    A Late Payment You Didn’t Notice


    Sometimes the reason is simpler than it seems: a late payment that slipped through the cracks. Even a single missed or late payment can have a noticeable impact on your score, especially if your credit was in good standing before. TomoIQ can help make sure that no payment, big or small, slips through the cracks.


    This often happens with smaller or inactive accounts—like a forgotten subscription or a card you don’t check regularly. Because it’s not top of mind, it’s easy to miss until you see the ding on the credit score.
    Setting up automatic payments, even just for the minimum due, can protect you from this kind of drop.


    A Hard Inquiry Hit Your Report


    If you’ve recently applied for a credit card, loan, or financing option, a hard inquiry may have been added to your credit report. These inquiries signal that you’re seeking new credit, and they can cause a small, temporary dip in your score.


    Even applications tied to “0% interest” offers or buy-now-pay-later options can trigger this. While the impact is usually minor, multiple inquiries in a short period can add up.


    Make sure to space out applications and be selective about when you apply, which can help minimize the effect.


    Your Credit Limit Decreased


    One of the more surprising reasons for a drop is a reduction in your credit limit. Lenders sometimes lower limits based on risk assessments, inactivity, or broader economic conditions—and they don’t always make it obvious when they do. And sometimes, it’s not even your fault, but the general economic and banking climate.


    When your limit decreases, your utilization percentage increases overnight, even if your spending hasn’t changed. That shift alone can have a big impact on your score.


    Checking your credit report regularly can help you catch these changes early and understand what’s behind them.


    Your Credit Report Updated (Timing Issue)


    Credit scores aren’t static—they update constantly as new information is reported. Sometimes a drop simply comes down to timing. A balance might have been reported at a higher point, a positive account might have aged, or different lenders may have updated at different times.


    These fluctuations can feel random, but they’re usually just the result of how and when data gets reported. In many cases, the score will correct itself as new information comes in.


    How to Recover Your Score Fast


    If your score just dropped, the most effective thing you can do is focus on the fundamentals. Paying down your balances each month can have the fastest impact, especially if your utilization is high. Keeping your balances low before statement dates close can prevent future dips, and avoiding new credit applications for a while gives your score time to stabilize

    .
    It’s also always worth setting up automatic payments across all accounts so nothing small slips through unnoticed. In most cases, these drops are just temporary—and if your habits are strong, your score will recover fast.


    Credit scores feel personal because they have such a big impact on our lives, but the truth is, they’re not personal. They’re simply a formula reacting to the data in your credit profile.


    Once you understand how that system works, the drops stop feeling random (and panic-inducing) and start feeling manageable.

  • Credit Hacks That Don’t Work (and Might Be Quietly Tanking Your Score)

    Unless you’ve lived under a rock the past ten years, you know that the internet is downright obsessed with credit hacks.

    “Boost your score 100 points overnight.”
    “Do this one trick banks don’t want you to know.”
    “Game the system.”

    And listen, we get it. Credit can feel like a mysterious, black box. So when someone promises a shortcut to the land of fantastic credit, well,  of course, you’re going to click.

    But here’s the not-so-clickable truth that no one really says out loud:

    Most credit hacks either don’t work…or worse, they work against you.

    And it’s so tempting to jump into hacks and quick fixes instead of focusing on long-term habits. You usually don’t realize that the hacks aren’t working until your score doesn’t move—or worse, drops.

    So let’s clear the air. Here are the most common credit hacks people swear by—and why they’re not the move.

    1. “I’ll Just Close Old Cards I Don’t Use”

    This feels like a life reset. Clean slate. Marie Kondo, but for your credit cards. 

    Unfortunately, your credit score does not care about your minimalist era.

    Closing old cards can actually hurt you because:

    • It shortens your credit history
    • It lowers your total available credit
    • It can spike your credit utilization overnight

    Translation: you look riskier and more erratic – not streamlined. 

    The move:
    If there’s no annual fee, keep the card open. Use it occasionally, let it live its quiet little life, and let it build your credit effortlessly in the background. 

    2. “You Have to Carry a Balance to Build Credit”

    This one? Straight-up misinformation that refuses to retire.

    You do not need to carry a balance. Carrying a balance in the long-term does more to hurt your credit than help it, and you do not need to pay interest in order to build credit. That’s an expensive credit-building strategy that works in reverse, 

    The move:
    Use your card. Pay it off in full. Repeat. That’s literally it.

    3. “It’s Fine If I Max It Out—I’ll Pay It Off Later”

    This is where people accidentally sabotage themselves by making one of the biggest credit faux pas around – going over their credit utilization limit and making one of the largest dents in their credit.

    “But what if I pay it off?”

    It might sound unfair, but even if you pay your balance in full, your credit utilization might already have been reported.

    So if you’re regularly hitting your limit—even temporarily—it can make it look like you’re financially maxxed out. Which is not the vibe we want lenders to get when they look at our credit profiles. 

    The move:
    Stay under 30% utilization. Under 10% if you’re really trying to level up.

    Yes, it’s annoying. But it matters.

    4. “I’ll Apply for a Bunch of Cards to Increase My Limit”

    In theory, more credit = better score, right?

    In reality? Not if you go about it like this. 

    Every application = a hard inquiry.

    Stack a few too close together, and suddenly you look…desperate for credit. And desperate for credit looks like you’re desperate for funds, which makes you look like a credit risk to lenders, and they’ll tighten the reins on what they’re willing to lend you. The more credit you look like you need, the less credit you’ll actually get approved for – and wreck your credit score in the process of trying. 

    The move:
    Be strategic. Space out applications. Quality over quantity. It’s better to find ways to increase cash flow than to apply for too much credit at once and hurt your credit score. 

    5. “I’ll Remove Myself as an Authorized User Once My Score Goes Up”

    This one is one of those “close but no cigar ” moments. But in actuality, timing here matters as the biggest part of the strategy. 

    Being an authorized user on a strong account can boost your credit. But if you remove yourself too early, you can lose that benefit just as fast.

    Especially if you don’t have much credit history on your own yet.

    The move:
    Stay on longer than you think you need to. Build your own profile before cutting the cord.

    6. “Just Dispute Everything on Your Credit Report”

    If TikTok had a favorite credit hack, it would be this. Ask anyone on TikTok and disputing anything and everything on your credit report is their go-to move. 

    And look—yes, you should absolutely dispute errors. In fact, we can help you with that, since disputing errors on your own can be overwhelming. 

    But disputing everything like it’s a strategy? Not it.

    Credit bureaus aren’t just going to delete accurate information because you asked nicely.

    And filing a bunch of random disputes can slow things down or backfire.

    The move:
    Be precise. Dispute what’s actually wrong. Leave the rest and just work on raising your score with what’s accurately there. 

    7. “I’ll Just Avoid Credit Altogether”

    Honestly? This one usually comes from a good place, or it’s a mindset that’s passed down from your grandparents (Sometimes a little bit of both). 

    It’s easy to see people get burned by credit, and 

    But here’s the catch: No credit doesn’t mean good credit.

    It means…no data.

    And in the financial system, no data can be just as limiting as bad data. Bad credit and no credit have the same effect on your ability to get credit. 

    The move:
    Use credit intentionally. Small amounts. Paid on time. That’s how you build trust with the system (even if the system’s a little broken).

    8. “Checking My Credit Score Will Hurt It”

    This myth needs to be retired immediately – because not checking your credit score has the potential to hurt it way more than not checking your credit score ever would. How do you know what to improve or dispute if you never look? 

    Checking your own credit score is a soft inquiry. Soft inquiries do not hurt your score.

    Avoiding it just means you’re guessing about your credit score, and guessing is how people stay stuck.

    The move:
    Check your score regularly. Know your numbers. Move accordingly.

    So, Why Is Everyone Still Pushing These “Hacks”?

    Because they sound like shortcuts. They make something that people perceive as scary and insurmountable (like building credit), easy and painless. 

    But that’s not the truth. The reality is that most people were never actually taught how credit works, and that’s why it’s easy to fall for “hacks” rather than simple, solid habits that help build real, foundational credit. 

    So the internet filled in the gaps…with half-truths, outdated advice, and strategies that might’ve worked in 2005 (maybe?) but certainly don’t hold up now.

    What Actually Works (Even If It’s Not Instagrammable)

    Here’s the secret advice, nobody actually wants to hear. 

    There is no hack.

    There is no loophole.

    There is no “one weird trick.”

    There’s just consistency. Pay on time, keep your balances low, don’t freak out, and apply for everything at once. And probably the hardest, but the best thing you can do when it comes to building credit — give it time. 

    While the above doesn’t exactly have the makings of a viral post, and it probably won’t get a million views, the reality is that it works. 

    And that’s what matters. 

    The Best Hack is Knowledge 

    If you feel like you’ve been doing everything “right” and still not seeing any “movement”, you’re not crazy.

    The system isn’t always intuitive, and it definitely isn’t always fair. (We’ve talked about that a lot since 2019.) 

    But trying to out-hack it usually makes things worse.

    Understanding it? That’s where your power is.

    Because once you get how it actually works, you stop chasing hacks—and start making moves that stick. 

  • 7 Secret Credit Score Killers Hurting Your Score 

    If your credit score isn’t where you want it to be, you’re definitely not alone – and you’re not necessarily doing anything “wrong.” 

    In fact, many people follow the basic, tried-and-true advice—pay your bills on time, keep balances low—and yet still see their score stall. That’s because some of the biggest credit score drops come from less obvious behaviors that most people don’t realize matter. The good news? Once you know what they are, it’s an easy fix that reflects quickly on your credit score. 

    Let’s reveal the hidden factors that could be quietly dragging your score down—and what to do about them.

    1. Using Too Much of Your Credit (Even If You Pay It Off)

    One of the biggest “invisible” credit score killers is credit utilization.

    Utilization is simply the percentage of your available credit that you’re using. Even if you pay your balance in full every month, your score can still take a hit if your utilization is high when your statement closes.

    For example, if you have a $1,000 limit and spend $800, that’s 80% utilization, which can lower your credit score. 

    Credit Rescue Tip: Aim to keep your utilization below 30%, and ideally under 10%, and you’ll see that effort reflected relatively quickly on your credit report. 

    2. Closing Old Credit Cards

    One of the most common “credit misconceptions” is that closing credit cards you aren’t using is a responsible way to build or manage credit, when in actuality, the fear of spending too much and what’s actually good for your credit are two wildly different things. 

    It might feel responsible to close a credit card you’re not using—but this can actually hurt your score.

    Why? Because it reduces your total available credit and shortens your credit history. You want future lenders to see that you have available credit that you don’t need to use, which is a great way for them to gauge responsible borrowing habits and money management. Think of open, unused credit cards as a good way to demonstrate “spending restraint” to future lenders. 

    Credit Rescue Tip: If there’s no annual fee, consider keeping older accounts open—even if you only use them occasionally. Unused open cards do a lot of good, without a lot of effort, for your credit score. 

    3. Applying for Too Many Accounts at Once

    Each time you apply for credit, a “hard inquiry” is added to your report. A few inquiries are normal—but too many in a short period can make lenders see you as risky or desperate (which also reads as risky).

    Credit Rescue Tip: Space out applications when possible, especially if you’re planning a major purchase, such as a car or home.

    4. Not Having a Mix of Credit Types

    It’s important to understand that credit scoring models evaluate your ability to manage different types of credit, like credit cards, loans, and lines of credit.

    If you only have one type (for example, just a debit card or a single credit card), your score may not grow as quickly, because there is no proof that you’re able to manage multiple types of credit. 

    Credit Rescue Tip: Over time, responsibly adding different types of credit can help strengthen your profile.

    5. Letting Small Balances Go Unpaid

    Ever hear of the term “death by a thousand cuts”? Small, sneaky charges – like a forgotten account or pesky subscription can have a 

    It’s easy to overlook a small charge—like a subscription or forgotten account—but even minor unpaid balances can be reported and damage your score. Small accounts have a big impact, and this could be one of the easiest ways to improve your score. 

    Credit Rescue Tip: Automation saves the day. Set up autopay for all accounts, no matter how small.

    6. Being an Authorized User on the Wrong Account

    Being added as an authorized user can help your credit—but only if the primary account holder has good habits. Otherwise, being on the wrong accounts can be disastrous for your credit score, because you’re basically tying yourself to someone else’s financial habits – something you have no control over. 

    If that person carries high balances or misses payments, it can negatively impact your score, too.

    Credit Rescue Tip: Only stay on accounts that are well-managed and have low utilization.

    7. Not Using Your Credit at All

    This one surprises a lot of people, but having credit that you don’t actually use at all (yes, that happens!) can be really damaging to your credit score. 

    If your accounts are inactive, lenders don’t have enough data to evaluate your behavior – it’s that simple. They need financial behavior and activity in order to know if you’re responsible or “risky.” 

    Credit Rescue Tip:
    Even if you have the cash, use your credit occasionally, even for small purchases, and pay it off consistently.

    When building your credit score, it’s so important to remember that isn’t just about avoiding big mistakes; it’s also shaped by small, everyday habits that often go unnoticed.

    The good news? Once you know what to look for, these “hidden” credit score killers are completely fixable. You can check your credit health with Tomo’s personalized AI financial advisor, TomoIQ. 

    By making a few, simple strategic adjustments, you can start building a stronger credit profile—and unlock better financial opportunities over time.

  • How this Startup is Making Credit Accessible to Everyone

    It’s 2023, but is there still structural racism in the credit card industry? In a survey from 5000 Americans, studies found that BIPOC individuals reported having the lowest or no credit score.

    Though the disadvantage for BIPOC folks has played a significant role in lack of financial education and literacy, this hasn’t stopped them from taking their personal finances into their own hands.

    Our credit card company, TomoCredit, aims to make credit accessible to everyone. We believe that all Americans deserve the right to credit and that no one should be discriminated against because of their race, status, age, etc.

    We are a startup based out of SF, CA, and our founder Kristy Kim, is a South Korean immigrant. Our team is also made of immigrants (90% of Tomo employees are immigrants/POC) and we built TomoCredit to solve our own acute pain points of not having credit history in the U.S.

    In addition to our diverse team, 95% of our TomoCredit customers are POC, which speaks to our unique understanding of just how different credit access for white Americans vs credit for everyone else works. To date, Tomo has helped over 3M people get access to credit they normally wouldn’t have had access to (with no fees or interest).

    If you are interested in learning more, please reach out to press@tomocredit.com

  • How to Get a Perfect 850 Credit Score

    If you suffer from a low or (in many cases) no credit score, it may be quite difficult to achieve some of your personal financial goals. Some of these goals include: obtaining an auto loan, mortgage, or applying for any other types of loans.

    According to FICO’s most recent statistics, only 1.6% of 232 million U.S. consumers have a perfect credit score at 850. This feat may seem unachievable, but it isn’t impossible.

    We surveyed 100 people in San Francisco and asked them what their credit score is. Many answered in the mid-600s to 700 range, with a handful above 800 and some at a PERFECT 850.

    We asked those that were above 800 how they achieved this. The following are some tips and tricks they shared:

    1. Pay your bills on time and always pay over the minimum.
    2. Don’t max out your cards.
    3. Keep a low or 0 balance. Some companies, like TomoCredit, feature autopay, so you never have to worry about making a late payment. Tomo’s autopay triggers weekly, so you’ll also never keep a balance.
    4. Only spend on what you need, not what you want.
    5. Have a budget and stick to it. Seems simple, but can be difficult and challenging in practice.
    6. Create a strategy for your credit card usage — designate a credit card to the spending type. For example, if you have more than one credit card, use one for gas and groceries only and the other for major purchases.
    7. Don’t open too many accounts. Retail stores usually have people fall prey to their credit card programs and many tend to forget they signed up for the card until they receive a late payment notice in the mail.
    8. Understand your APR/interest rates. Know how much you are paying and what you will need to pay.
    9. Don’t close your credit card accounts. This factors into your FICO on credit card length history.
    10. Check your score for free. Experian, Transunion, Equifax all have annual free credit reports. Some of your current accounts may also show you your current score on the dashboard when you log in, like Tomo’s dashboard for instance.

  • This startup helps you be credit card debt-free in 2023

    Credit card debt, or any debt for that matter, can be a huge headache. No one likes to borrow money, especially if there is interest accruing on top of that. This New Year, make sure you are well organized and have a plan focused on your financial goals. SF based startup, TomoCredit, helps their users manage credit debt through one of their unique card features — weekly autopay. Users don’t have to worry about remembering to pay on time or carrying a large balance. Instead, the autopay feature triggers weekly on users’ full balance. This means a quicker credit score boost AND 0 credit debt! You start with a 0 balance every week.

    Nothing says “new year, new me” like a freshly paid-off credit card every week! Asides from the nifty autopay feature, TomoCredit also features a 0% APR/0 interest AND you don’t have to have credit history to apply!

  • What Goes Into Your Credit Score?

    A good credit score is essential for purchasing a new place, a new car, or taking out a loan with better interest rates — but what factors go into the number?

    No Single Number

    First, there is no definite credit score — there are different credit score models. The credit reporting agencies TransUnion, Experian, and Equifax together give the VantageScore. The FICO score is another well-known and widely accepted model that was introduced in 1989. Creditors use the FICO score to evaluate past credit use for lending decisions.

    Factors of the FICO Score

    According to the FICO website, the score pulls from five different categories: payment history, amounts owed, length of credit history, new credit, and credit mix.

    Payment History (35%)

    This is the most important category — it looks at if you have made your credit payments on time. The score in other words reflects your trustworthiness and timeliness. Repeated late payments will damage your score.

    Amounts Owed (30%)

    This looks at how much of your available credit you are using. By standard, using about 30% is recommended. For example, if you have a $1,000 credit limit, try to use around $300.

    Length of Credit History (15%)

    This factor looks at how long you have held your credit accounts. The longer, the better — but if you have an old credit account that you have made many late payments on, that will not reflect well on your score.

    This category also explains why many people are encouraged to start a credit card as early as possible — especially if you are a college student.

    New Credit (10%)

    When you open a new credit account, it will decrease your score temporarily, for up to six months. Making new credit accounts however is not discouraged. Rather, you should not be opening too many in a short period of time.

    Credit Mix (10%)

    The credit mix looks at the different types of accounts you hold: credit cards, loans, and more. Credit cards are considered revolving accounts, where payments are made monthly and are flexible. Installment accounts like mortgage loans are fixed monthly payments. If you prove your responsibility to manage both, it will reflect well on your overall credit score.

    The biggest takeaway should be that above all, timely payments are significant in increasing your credit score. You can set up autopay functions like many credit card accounts offer, or set monthly reminders on your phone to manually make the payments.

    Although different credit scores have different calculations, these factors overall remain important across the board. Knowing these different factors will help you guide your decisions on credit spending, and opening new accounts.

  • The Waitlist, Some Changes, and What’s Next: An Update From Tomo

    This pandemic has no doubt been hectic for everybody. With millions of Americans losing their jobs, millions unemployed, and millions infected, millions of us are growing more and more frustrated. When the shelter-in-place orders began back in March, like most of you, we were worried about what the future would hold for us. As most of you know, working remotely presents its challenges. But we are reorganizing and getting back on track. We just wanted to take the time to write this to let you know that…

    We Hear You

    We have received countless inquiries about the Tomo waitlist and rightfully so. An overwhelming amount of you have been waiting for your card for months at this point, and we understand your frustration. As of now, we have over 100,000 people on the waitlist. Due to some changes related to the pandemic, we currently process all of our pre-approvals manually. The moment they are processed, we send out invites in waves and, thankfully, we will be sending out an increasing number of waves in the coming months. We recommend that over the course of these next few months that you keep an eye out for your invite. If you don’t receive an invite by then, please reach out to us. We are in the process of reorganizing our customer support and will be adequately prepared to answer any questions you may have for us moving forward. However, due to the volume of applications we have received, please keep in mind that we will be prioritizing the questions of current cardholders first.

    We know that sounds like a long time, but it will be worth it. Trust us. We have big plans for the future here at Tomo!

    What’s Changing

    Since the pandemic provided some unpredictable challenges, our credit card has had to make some fundamental readjustments. With a heavy heart, we must eliminate the Tomo Credit Card “2 for 2” cash back referral perk. We hope to be able to deliver you other more unique and personalized rewards in place of the “2 for 2” referral program, and we intend to work with merchants in order to create a user experience that you’d expect from “the credit card of tomorrow”. Don’t worry, you will still receive 1% cashback on all purchases and we will continue to offer you a history-free credit card with flexible limits and no hidden fees. Our goal here at Tomo has always been to help our members establish the financial security they deserve, not to profit off of their financial insecurity like the big banks do. For those of you that have referred members to tomo, fear not, as our new referral program will be released in the near future and you will still be awarded for those referrals.

    We can also offer one other awesome perk to you should you meet the requirements, and that’s up to 20% cashback. Yeah, you read the right. 20%. If 20% cashback is what you desire and you think you’re qualified, we encourage you to apply to become a Tomo ambassador! As ambassador, you will promote the Tomo card and encourage your community to sign up for one via a personalized referral code. For each person you refer that gets approved, you will receive an additional 1% cash back, with a maximum cap of 20%. That means that if you get 20 people to sign up, you’ll get that sweet 20%. Keep in mind though that the ambassador cashback bonus is valid for 3 months from the time each of your referrals is approved. Think you can do it? Apply to become an ambassador here!

    What’s in Store

    We cannot thank our members enough for their overwhelming support. Tomo has always believed that you are worth more than an arbitrary credit score. We have always been dedicated to helping our members build credit and save money, and, moving forward, we hope to win back your trust. As we proceed, we will be making adjustments to our card in order to better cater to our members’ needs.

    But first things first: I think that we can all agree that this year has just got to end already. When the pandemic begins to slow down, we promise to speed things up, and to be more prepared than ever to provide you with the experience you deserve from the credit card of tomorrow.

  • Debunking Myths: The relationship between student loans and credit score

    For many college students, student loans are a major component in helping to afford college. Life after college can be especially confusing when having to manage both student loans and personal finances. For some, it is the first time they have to deal with things like budgeting and making student loan payments. Many schools also do not teach financial literacy, leading there to be several common misconceptions regarding student loans and credit score. So, how does student loan affect credit score?

    Many believe that there may be a good or bad association between student loans and credit score, or that there is no relationship at all. But in reality, student loans can affect your credit score both negatively and positively.

    How to avoid student loans from hurting your credit score

    There are five components that make up your credit score: amounts owed, new credit, payment history, credit mix, and length of credit history. Student loans affect payment history, credit mix, and length of credit history.

    Keeping up with monthly payments is key. Payment history makes up 35% of your credit score. While forgetfulness does occur, missing continuous payments will be detrimental to your payment history. Payments that are overdue should be taken care of immediately. The more overdue your payment is, the larger the consequence that you will face. You may end up going into default as a result. For federal student loans, this occurs after 270 days of not making the payment, and for private student loans this occurs after three months. Your credit score will drop when your lender reports the late payment to one or all of the three major credit bureaus.

    Remember to borrow mindfully. Applying for new loans can hurt your credit score, especially if you have several loans, do not have a long credit history, or student loans are your only form of credit.

    If you are forgetful, it may be helpful to schedule reminders on your calendar or set up autopay. If you cannot pay your student loans, try asking your lender to pause or lower your monthly student loan payments as soon as possible.

    How credit can benefit your credit score

    Conversely, making payments on time will improve your payment history, and therefore benefit your credit score. Presumably, if you have student loans, you will be repaying it within several years. The amount of time taken to repay your student loans affects your length of credit history. Having a history of making regular payments will present you as a reliable borrower to lenders. Student loans also help to diversify your credit mix, increasing your credit score.

    If you have student loans, it is important to stay informed about their effects on credit score. How student loans affect your credit score will depend on how you manage your student loans. Making sure to stay organized and on top of your payments will lead you to a better credit score. Having a good credit score is vital to your financial health. You will receive many benefits from a good credit score including low interest rates on credit cards and loans, a higher chance for loan approvals, and much more. If you would like to improve your credit score, consider applying to Tomo. No credit history required, no interests or fees, and your credit will never be pulled.

  • Are Credit Cards Worth It?

    Do you really need that extra piece of plastic in your wallet? Yes, and here’s why.

    Build credit.

    A credit score and credit history may seem ambiguous now, but there will come a day when you will wish for that high credit score and long credit history. Whether it is renting or buying a property or financing a car purchase or some other large purchase, your credit score and credit history matter. They will determine if you get approved for that new home or new car, and the borrowing rate you are charged. Would you rather pay more than necessary? Absolutely not, no one does. Time to get a credit card and start building that credit.

    Rewards.

    There are so many credit cards out there and most of them offer some form of rewards, sometimes even just for signing up! Besides sign-up bonuses, most credit cards offer continuous cash back rewards as you use the card. Why not start paying yourself back for spending money?

    Interest-free borrowing.

    By using credit cards, you can borrow money for a short period of time and pay zero interest as long as you pay off the credit card in full by the payment due date. You can’t get a lower rate than that.

    Peace of mind.

    Most credit cards come with some form of insurance these days. This means if you have a fraudulent charge on your card, you can easily report it to your bank and get the funds back right away. If you rely on using cash for all transactions, you risk getting it stolen or simply losing it. With a debit card, your money actually leaves your bank account if a fraudulent charge were to occur. You will eventually get your money back, but it can take longer than if it were to happen to a credit card.

    Avoid foreign transaction fees.

    There is a lot of world to see and that requires traveling. If you get the right credit card, you can avoid foreign transaction fees when traveling in a different country, which can add up quickly. Save your money for traveling and don’t waste it on fees.

    Convinced you need a credit card now?

    Be one of the first to get in on the next generation of credit cards. Visit TomoCredit.com to learn more.