Debt and More Debt. Let’s Talk About It.

How to become a smart borrower.

The current state of the world has pushed many of us to think a little harder about personal finances and financial security. Being in debt during a time like this can make you feel uncertain and anxious, but know that you are not alone. I interviewed my friend Chelsea, now a postgraduate student, about her experience with student loans and some tips she has to share. Remember that all debt, including your student loans, has an impact on your credit score, which affects your future borrowing ability. Simply put, it’s something you want to understand and take care of as early as possible.

Whether you are a student who is preparing to take out loans, a student loan holder in the midst of the cycle, or a working individual whose credit score has been impacted by student loans, these tips on how to improve your credit score and have more financial autonomy are for you.

Pay on Time (Obviously).

The golden rule of loan repayment — pay your installments on time. This may seem obvious, but a 30+ day late payment will significantly impact your credit score and can remain on your credit reports for up to seven years, even if the balance is paid-in-full.

Beware of Automatic Payments and Blended Rates (1).

Have you looked into each loan individually to see the variance in interest rates? There are cases with automatic payments in which a blended interest rate (average of all the interest rates on the loans) is charged rather than loans with the highest interest rate being paid off first. This may not be the case for you, but take the time to check. Automatic payments are a great way to ensure on-time payment, but make sure you understand the mechanics behind it.

Do Your Research — Don’t Always Trust a Customer Rep.

Be your own advocate and do your own research. While customer representatives are a resource to help you understand your student loans, many of them are not experts, so if you have a special circumstance that could potentially impact your credit score, talk to more than one representative and obtain written communication if given direct advice.

Keep a Low Utilization Rate.

A low utilization rate essentially means only using (and repaying) a small percentage of your credit card limit (under 30%). For example, if you have a credit card with a credit limit of $1,000, you should ideally be spending no more than $300 before repaying the balance. This demonstrates more financial responsibility and less risk as a loan holder to the eyes of the credit bureaus.

But Wait, How Do I Get a Credit Card with an Impacted Credit Score?

The chicken and the egg dilemma. How do you obtain a credit card to build credit with an impacted credit score from student loans? There are several options with varying APRs and annual fees, but I wanted to share a new card that was thoughtfully designed for individuals in this position. Tomo enables you to build credit, without discriminating against your prior credit history (if any), and charges no APR and zero fees (2). It feels too good to be true, but it’s really just a solution created by someone who faced similar challenges and understands the need to address them.

Hopefully this article helps introduce or reinforce ways in which to be mindful about your student loans. Given each person’s unique circumstance, it’s important to do your own research and find the best option for you.

Chelsea and I are in no way financial advisors, student loan experts, or guaranteeing success if you implement the tips listed above. We are simply sharing personal findings and encouraging conversation around financial autonomy, with the hope that it helps someone. If you are fortunate to not have any student loans or if the mission of Tomo speaks to you, I invite you to share this article to help someone in your network who might benefit from this.

Stay safe, take control of your future, and think about who you can help during this unique time.

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(1) This is related to federal / government-issued loans.

(2) Tomo is currently accepting applications for a limited number of credit cards that will be available this summer. For more information, please visit the company’s website or email help@tomocredit.com.