Tag: Students

  • 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.

  • Things I Wish I Knew About Finance In College

    When I was 4 years old, I remember thinking, “I can’t wait to be an adult!” Then, when I entered my first year of college, I had to be an adult and I had no idea how. Adulting is hard, I get it. A big part of adulting is learning and growing from your mistakes, and a big mistake that most people make in college is not learning how to manage their money. Personal finance isn’t something they teach you in high school, so don’t feel bad about not knowing anything! Here are some things I wish I knew about finance in college, so that you don’t have to repeat my mistakes!

    Don’t spend more than you can afford.

    I was fortunate enough to have my parents pay for my expenses in high school. I didn’t see the money leave my bank account so it didn’t occur to me that I might have been spending a lot. When I started college, I started paying for my own expenses and it hit me how bad my spending habits were. I ended up spending without taking note of how much I was spending, because I was so used to just buying things without a care in the world. After I started noting my spending habits, I ended up saving a lot of money and only bought things I needed. Make sure you only buy things that you can afford and always take note of how much you spend so you don’t get any surprises at the end of the month!

    Put some money into savings.

    It’s tempting to spend all of your money because with more money you can buy more things! However, that only gives you temporary satisfaction. Putting your money into a savings account is an investment into your future. You never know if you might run into a tough financial situation in the future. If you start by saving five dollars a day, that can add up almost $2000 in a year! This can also help when paying off student debt in the future. When you put money into a savings account, you also earn interest! Consider looking at a high-yield savings account since it has a higher interest rate than a regular savings account.

    Take out loans wisely.

    Student loans may seem like free money since you don’t have to pay it back immediately. Some students might end up using this money for non-school related expenses. It’s important that you manage your loans wisely so that you don’t end up with a huge debt at the end of it all. Learn about the different types of loans your school offers. It’s typically recommended to take out subsidized loans first whenever possible before considering unsubsidized (private) loans. The government will pay for the interest on subsidized loans while you are still in school, but unsubsidized loans will start accruing interest the day you take it out. When it comes time to pay off your loans, make sure to start with the loan with the highest interest.

    Turn your hobby into money.

    You can make money out of doing just about anything! With the help of the internet, it’s become even more simple to sell your services. If you’re interested in photography, consider offering your services for graduation photos! For those into arts and crafts, you can sell your work using different platforms, like Instagram or Etsy. I even knew someone who was cutting hair in their apartment! Not only can you make money, but you can also add these experiences onto your resume or portfolio. Get creative and almost anything can earn you a stream of income.

    Understand how credit works.

    You hear it all the time, but everyone really does need credit. Having a good credit history will help when buying things like a car or a house. Your credit score basically tells the banks how trustworthy you are with money. Getting your first credit card to start building credit might not be easy. Credit card companies look at your credit before deciding if they can trust you with a credit card. Luckily, there are some great options for students. Students can become an authorized user of their parent’s credit cards. If students want their own card, they can consider a student card. Student credit cards consider the fact that you may not have a credit score and are geared towards college students. Another great option is TomoCredit. The Tomo card is great for college students and international students who don’t have a credit score. There are no interest fees and Tomo will never do a credit pull, which means it won’t lower your credit score in any way! It’s important to start early, because the longer your credit history, the better!

  • Money Saving Habits for College Students

    This school year is unlike any other. For both continuing students and freshmen, the college experience is fundamentally changed and provides new and unique challenges on top of the constant existential dread of just being a student. However, may we find reassurance in the constants of college life, such as the fact that college students are always trying to find new and innovative ways to save a dollar or two. Here are some money saving tips and habits to keep in mind as you navigate the upcoming academic year.

    Rent your textbooks

    Buying the required textbooks for all your classes every semester adds up quickly. Let’s be honest, does that 600 page Intro to Physics textbook have much practical use when classes are over besides serving as a very expensive paperweight? Know how to get your work done without having to drop cash on textbooks. With most libraries closed at the moment, it’s no longer possible to drop in and do homework using reserve copies.

    However, never fear, for there is a solution for you studious folks. Many online retailers offer rental programs, allowing students to borrow textbooks for however long they need. The best part is, you can rent both hardcopy and ebook versions of most textbooks for quite cheap. Hardcopy rentals come with a free return label that you attach to the box it was shipped in when you’re ready to return your books. If you prefer not to worry about shipping your rentals back, ebook rentals are instantly available and can be accessed from any device until your borrowing period ends.

    Rent your laptop and wifi

    Check if your college has a tech rental or device lending program. Many universities have implemented such programs to ensure students have access to online learning materials. Students in need of essentials such as a laptop or wifi hotspot are encouraged to utilize their college’s resources so that you can continue getting a quality education to the best of your instructor’s abilities.

    Bored? Check out your local library

    Libraries across the country are online. If you’ve never had a city library card before, it’s better to get one now than never. Learn that language, read that biography you’ve been meaning to read, if we’ve learned anything about ourselves the past 6 months is that it never hurts to take time for yourself. Let the library’s resources help you with that. Also, you’d be surprised at how much your county library has to offer; many of them also offer audiobooks, films, and music!

    Student perks

    Although it may not seem like it some days, being a student has its perks. Check in with your college to see if they offer free programs such as Adobe Creative Suite or Microsoft Office. These can easily cost you hundreds of dollars out of pocket. Apart from productivity programs, students are also blessed with student discounts from a variety of retailers and companies such as Spotify and Crocs.

    Free food!!

    Colleges around the country understand how tough it is for everyone right now and are implementing programs to help alleviate some of the issues students are facing as of late. If you are facing food insecurity, check to see if your college has an open pantry or free grocery program. These programs are dedicated to providing students with fresh fruits and vegetables and other pantry staples. Bonus: having all these fresh ingredients will inspire you to strengthen your cooking abilities, which is always a solid skill to have.

    Create a monthly budget

    At the beginning of each month, evaluate your spending habits. Did you overspend on anything? Have you gone out to eat more often than you intended? You may need to confront yourself. It may be uncomfortable at first, but you will eventually develop a sense of discipline and restraint that will benefit you in the long run. Use the 50/30/20 rule to allocate your budget for the month into the categories of needs, wants, and savings. With this method, you will put 50% of your budget to needs such as groceries and bills, 30% will go to wants like dining out or anything else that is not essential but enjoyable, and 20% is stored away in a savings account. Just remember that this is a general guideline, and everyone has different financial situations.

    It’s cheaper to eat healthy

    Stocking up on snacks, energy drinks, and instant ramen at the grocery store seems like the cheaper and easier option for daily sustenance. However, there’s a reason the mantra “health is wealth” is so universally lived by. Being mindful of how you are eating has its long term health benefits, sure, but we’re talking about cash here. Fresh produce at a few dollars a pound can go way longer than a frozen meal at the same price. Download the apps of your nearest grocery store and watch how far your dollar can go.

    Got credit? Maintain a high credit score!

    Perhaps having a high credit score is the last thing on your mind, with exams always around the corner and figuring out what you’re going to eat for dinner. These are present and valid concerns, but it never hurts to prepare for the future. We all know that credit is a delicate game, but if you budget correctly and consistently make on-time payments then the benefits of having a high credit score will follow you even after you graduate! A good credit score means you’ll be paying lower interest on loans and you’ll have a higher chance of getting approved for better rates, saving you a ton of money and stress in the long run. Don’t know where to start? Get pre-approved for Tomo Credit — no fees, no interest, and no credit score needed! Learn more here.