How to Consolidate your Student Loans

 Photo by  Brooke Cagle  on  Unsplash

Photo by Brooke Cagle on Unsplash

When I graduated college, I had four different loans with two different lenders. That means I had four different payments to make each month. Each of them was different amounts at different interest rates, both fixed and variable. That’s enough to give anyone a headache. Imagine if I could have just made one single payment to one lender each month instead of juggling variable numbers around for a few years?

There are a few different ways to do this.

If your student loans are with different lenders, they are often different types of loans. Unfortunately, you can’t simply throw all of them together. Your loans are either federal or private. Federal loans are much more common than private, this is preferred. Private loans are often more difficult to come by; they require cosigners or a high credit score. They also have higher interest rates, which deters many students from applying in the first place.

Federal loans are a little easier, but they also come in different shapes and sizes. They are government funded and universally have lower interest rates. Federal loans require no credit check or collateral, and they can also be consolidated upon graduation.

There are two types of federal loans, Stafford and Perkins. There are also two types of Stafford loans, subsidized and unsubsidized. Did I lose you? Stay with me.

Subsidized – You’re not responsible for making payments until after you graduate, and the government covers your interest until then. To qualify for a subsidized loan, you must prove financial hardship. You can only borrow so much per year, and the amount is income based on either your or your family.

Unsubsidized – Your payments are deferred until graduation, but you’re responsible for all your interest on this one. However, all students qualify for this type of loan, and the dollar amount is a much larger range. This is the most common type of student loan.

Perkins loans – This program ended in September 2017, but it’s possible you may have one in your arsenal. Perkins loans were more sought after than Stafford loans because the government covered your interest until graduation and they provided a grace period of nine months after graduation until payments were needed. They also guaranteed a fixed interest rate of 5% while Stafford loans were commonly higher based on credit score.

If you graduate college with only Stafford subsidized loans and Stafford unsubsidized loans, you qualify for direct consolidation. This is here to make your life much easier. You can consolidate anywhere from 2 to 100 loans into one single payment to one lender. They’ll take an average of all your interest rates and help you choose a repayment option that comfortably fits your lifestyle. It is free to consolidate, but you can only do so once.

While this is the best option for some, it may not be for others. Do your research and educate yourself on your interest rates and last payment date on your loans. I’ll preach consolidation for people with an unmanageable amount of loans with countless lenders. However, after a bit of research, this was not the best option for me.

I advise visiting StudentLoans.gov to see if you are eligible for student loan consolidation. You’ll need your Federal Student Aid ID to start, and all details involving your student loans. They’ll want to know your interest rates, types of loans, amounts, and period of repayment. The application will let you choose a repayment option that comfortably fits your lifestyle. This will allow you to choose a monthly payment that you can afford and a period of repayment that will allow you to pay off your loans in a reasonable amount of time. It’s important to find a happy medium here. You shouldn’t choose a lower payment than you can afford because you’ll end up paying more interest in the long run. Be honest with yourself and see what your budget really allows. You went to college and took the loans; it’s your responsibility to pay them off.

Between the time of application and approval, you will still be responsible for making payments on all necessary loans as to not hurt your credit score. Upon approval, you will only be responsible for the single payment through one lender.

Consolidating your loans can be a blessing or a curse. Make sure to do your research and ask questions before you commit to anything you aren’t sure of. This is a program meant to help you, make sure it’s an asset to you before signing the dotted line.


Per usual, I owe all my correctly spelled words to Zack Mathis

Work Card, Play Card

 Photo by  Benjamin Voros  on  Unsplash

I'm heavily biased towards credit cards with travel-related rewards as opposed to cash back cards. I caught the travel bug shortly after college, and it made sense for me to supplement the bulk of my budget with rewards. I'm on a plane at least once a month, and I try to make it as affordable and comfortable as possible.

I have a small arsenal of credit cards in my wallet, but I definitely have my favorites. Some have amazing points to dollar ratios, a few have baggage perks, and some I’m just too loyal to give up.

Note* as a rule of thumb I never look at the interest rate on credit cards. You should be using this as a debit card, meaning you shouldn't be purchasing things that you won't be able to pay off when the statement comes. The point of having a credit card with rewards is to benefit you. If you're paying late fees and interest, the credit card company is the one benefitting.

4. Airline specific cards

 I tend to fly either Southwest or American Airlines. I have a card for both. My hometown only flies American and Delta, American is almost always the more affordable route. The $95 annual fee on the card pays for itself in waived baggage fees. I also get priority boarding and first dibs on a window seat.

Citi/ AAdvantage Airlines Mile Credit Card

  • Sign up bonus: 30,000 points after spending $1,000 within 3 months of opening the card, first checked bag is free
  • Please note these miles can only be used with American Airlines
  • Annual fee: $95 after first 12 months
  • Rewards: 2 miles per $1 on American Airlines purchases, 1 mile for all other purchases
  • Apply Here

All in all, this isn’t my favorite card. The sign-up bonus was okay, and the dollar to mile ratio is poor. This card really only makes sense for me since I fly back home for approximately 45 weddings per year. Sup Midwesterners?

Southwest Airlines Rapid Rewards Plus Card

  • Sign up bonus: 50,000 points when you spend $2,000 within 3 months of applying for the card.
  • Annual fee: $69
  • Rewards: 2 points per dollar on all Southwest purchases, 1 point per $1 on all other purchases. 3,000 points each anniversary of your cardholder date
  • Apply Here: Email me below for referral link

When I’m not flying American, I’m flying Southwest. The competitiveness inside me enjoys checking in exactly 24 hours prior to boarding and waiting for my boarding assignment. It truly is a hunger games type event throwing elbows at 6am for a window seat.

3. Capital One VentureOne Rewards Credit Card

This card is my ride or die. It doesn’t have an annual fee, Capital One is always amazing to work with, and it has decent rewards. I’ve had this card since I was 18 so it’s still in my arsenal solely to prop up my length of credit for my credit score. It’s my go-to when someone asks for a suggestion for a starter credit card.

This is my back up card that I use if my day to day card is compromised. I also put my monthly (lol) parking tickets and toll bills on this card to keep it active.

  • Sign up bonus: 20,000 points after you spend $1,000 within 3 months of applying for the card
  • Annual fee: FREE!!!
  • Rewards: 1.25 miles per $1 on all purchases
  • Apply Here

2. Capital One Venture Rewards Credit Card

This card is just a bit of a step up from the previous. With the added annual fee comes slightly better rewards.

Both of my parents have this card, and the apple doesn't fall far from the tree. The Dixon family will gush over Capital One until we're blue in the face. I'd rather give up carbs than my Capital One card, and that's saying a lot.

This is my day-to-day card. The rewards are incredible and booking travel couldn't be easier. When you call, you even get a real human on the line. They are quick to fix any mistakes and are incredible at catching fraudulent activity. A little too good... I once bought $12 worth of soft serve at 11pm and promptly received a text asking me to verify the purchase. Even my credit cards know I prefer to be in bed by 9pm every night.

  • Sign up bonus: 50,000 points after spending $3,000 within 3 months of applying for the card
  • Annual fee: Free for the first year, $95 each year after
  • Rewards: 2 points per dollar on all purchases
  • Apply Here

1. Chase Sapphire Reserve Credit Card

This is the newest addition to my wallet, and I’m already in love. This one definitely took some pro/con lists, but I eventually bit the bullet because I do travel so often. If the Sapphire Reserve doesn’t make you feel middle-class fancy, I’m not sure what will.

  • Sign up bonus: 50,000 points after you spend $4,000 within 3 months of opening the card
  • Annual fee: ….$450, let me explain
  • Rewards: Ready? 
    • $300 annual travel credit. This is automatically applied to any travel coded purchase (Airbnb, Uber, Airfare, Baggage…)
    • $100 towards Global Entry application or $85 towards TSA pre-check every four years
    • 3 points per $1 on all travel and dining related purchases
    • 1 point per $1 on all other purchases
    • Priority Pass Select membership (This means airport lounges)
    • Access to special travel deals through affiliate programs
    • Travel and Purchase protection
  • Apply Here: Email me below for referral!

So, I know the $450 annual fee is a bit intimidating. After you factor in the travel credit, global entry or TSA pre-application fee, and access to free food and drinks in lounges, the card made more than enough sense to me. Plus, it’s a metal card so you’ll look like a total badass while you sip your free champagne in a bougie lounge after breezing through the long TSA line.


Again, Zack Mathis is the best for dealing with me drowning on about all things credit. Seriously, you're a saint. 

Jager Bombs & Compounding Interest

 Photo by  Andrea Tummons  on  Unsplash

Life lessons often come when you least expect them.  And they can carry such a wallop that your invincible post-grad ass hits the ground faster than you can regret not taking a victory lap. I don't know about you, but the life lessons I value most didn’t come from a classroom or a textbook.

See, my former boss was an avid drinker. I'm convinced he only hired me so he wouldn't be the only one hungover in our 9 am Thursday staff meetings (RIP Corner Bar $5 bucket Wednesdays). Fast forward through a few company-funded lunches, even more expensed happy hours, and a small period of time where everyone who I reported to left the company. I had a questionable internship under my belt and was ready to graduate. What better way to send me off into the adult world than a liquid dinner?

Like most red-blooded Americans, I’m a sucker for free alcohol. And so, when your boss orders a round of literally anything, you smile and drink up. The limit does not exist.

Zombie Dust? Sure, it’s an acquired taste (so why not work on acquiring it?).

Jager bombs? Smells like my freshman year and regret, but sure, I’m game.

That final “wait, wait… OK, one more round”?  It’s fine, everything's fine.  The hangover is tomorrow’s problem.

Several hours - and a tab I’d rather not know the total of later – I found myself and the other intern blacked out in a Target, buying cheap champagne.  Because graduation was tomorrow and you need mimosas before your ceremony or it’s not a proper graduation.  Trust me.

I don’t blame the cashier, I really don’t. She asked if I wanted to save 15% off my first purchase and open up a Target REDCard, and my frugal self said yes. Why would I not want 15% off my $4 bottle of champagne? I’m awesome at credit cards. I’ve never made a late payment, never have paid a cent of interest, never over utilized.

Long story short, I had a few mimosas, graduated, and left for a month-long European adventure. I’ll assume Target sent me the card in the mail and I shredded the envelope because I had no memory of ever opening the card. I’ll also take responsibility for screening all my calls and straight up avoiding those unknown 800-numbers (pro-tip: they aren’t always spam calls).

As a result of this, it took Target about six months to find me.  And once they got ahold of my irresponsible ass, they made me pay my bill and then some. 

My general rule of thumb is to ignore the interest rate when you open up a new card because you shouldn’t be paying interest or late fees anyway. Well lol at my life. My interest rate was around 25%, not unlike most credit cards issued to 22-year-olds. How much do you think my $4 bottle of champagne cost after six months? Roughly $300.

You read that right: I wound up paying $300 for a cheap bottle of champagne because I was an idiot. That’s not even mentioning the damage it did to my credit score, but that’s a different story for a different day.

Why?  Late fees and compounding interest.

Much like the Jager bombs, compounding interest can sneak up on you like a bitch.  Sometimes, it can work very much in your favor or knock you flat on your ass. Say you put $1,000 in a savings account. At the end of each month, you earn interest on that money. At 20%, your $1,000 would be $1,219.39 at the end of a 12-month span. You’re making money on the money you just made.

So, reverse that and let’s talk about how I fucked up.

I put $4 on a credit card. Charging $4 to a credit card is dumb enough, but that’s not the point. I was charged a late fee and my first month of interest (at around 25% APR). Then when I failed to pay that bill, I was charged 25% and another late fee. So at the end of month two, I had accumulated a $63 bill that I would continue to ignore until month six. You can see how this spirals downward and could end up in hella credit card debt.

Please, learn from my mistakes. Don't black out and open up credit cards. And even if you do, please pay them off. Thankfully my original purchase was only $4 but imagine if it were even $100. Credit card debt is a slippery slope and it’s easy to bust your ass on late fees and interest if you’re not paying attention. As much as that may hurt, the damage to your credit score is even worse.


Have I mentioned how wonderful Zack Mathis is? Thanks for putting up with my shit.

How to Increase your Credit Score

 Photo by  Toa Heftiba  on  Unsplash

Photo by Toa Heftiba on Unsplash

Whether you’re starting from scratch or recovering after a small Target credit card mishap, there’s always room for improvement when it comes to your credit score. The universal goal is to have the highest score possible. This will mean lower borrowing interest rates, being exempt from utility deposits, and more exclusive credit cards with better rewards.

For beginners looking to build a credit score from scratch, I recommend a secured credit card. This essentially acts like a prepaid gift card to help you learn the ins and outs of using credit. It’s best to choose a card with no annual fee. Your deposit will be based on your existing credit score. It’s likely that if you’re just starting out, your deposit will be equal to your limit. Most companies offer a limit of $200 to start and then gradually raise the limit when you continue to pay the card off each month. Remember to keep your utilization under 30% and you’ll be golden.

I was lucky enough for my dad to agree to cosign on a car loan with me. This means he trusted me enough to tie his credit score to mine for the length of the loan. If I missed a payment, his credit score took a hit. With a cosigned loan, you’re legally obligated to make your payments, but the borrowing interest rate you receive is correlated to the cosigner’s credit score. Be nice to your parents and ask if you can pretty please borrow their credit score. Repay them by making all your payments in full and on time. You’ll end up raising their score as well.

As a post-grad, I hope you have at least a fairly decent credit score that just needs a facelift. Maybe you’ve had a credit card or a student loan to get you started and now just need some tips to get you from good to excellent.

The number one piece of advice that I will always give you is that you need to be paying every single one of your bills in full and on time. If you can’t afford to purchase something, you shouldn’t be making that purchase. It’s as simple as that. If you pay a bill late, you’ll be hit with a late fee and compounding interest. Remember my Target credit card? I had to pay a few hundred dollars for my few bottles of champagne because I made a mistake. Don’t let this happen to you.

One mistake many make is opening up a large number of credit lines in a short period of time. It’s okay to open one or two lines per year, even three depending on your situation. But opening more than 5 lines of credit in 24 months tips lenders to think that you’re relying too heavily on credit and may be getting into debt. It’s the same concept of job hopping. Employers are wary of people who switch jobs every few months just as a lender would be cautious of letting you borrow if you’re opening too many lines of credit.

It’s also important to really research the cards you’re opening and think about the long-term effects. Your credit score decreases each time you close a credit card. If you don’t think this is a card that will benefit you for years to come, it might be best to think twice before applying.

For example, it may seem like a good idea to open a store credit card if you regularly shop there. The cashier might offer you a sign-up bonus and a certain percent off your first purchase. They’re trained to make it sound sexy. However, you should weigh these benefits against those offered by any other cards you already have open. If you don’t see yourself shopping at Kohl’s for the next 20 years, it may not be the best idea to open a line of credit with them.

I have an American Airlines card with a $59 annual fee. I’m not crazy about the rewards and it’s not my ideal card, but it allows me to have one free checked bag and priority boarding on all American Airlines flights. I opened this card years ago knowing it wouldn’t be my go-to, but decided to because my hometown exclusively only flies American and Delta. This card has allowed me to save approximately $700 on baggage fees in the last 3 years. The pros (free baggage) outweigh the cons (annual fee) in this case.

It’s important to remember that building a credit score, especially from the ground up, takes time and effort. Learn from my mistakes and be strategic about which lines of credit to open, keep your utilization low, and carefully make all your payments on time. By following these steps, you’ll go from fair to excellent in no time.


Special thanks to Zack Mathis for reminding me that I'm good at money, not grammar.

What Factors into my Credit Score?

 Photo by  Amanda Sandlin  on  Unsplash

Maneuvering through websites full of financial jargon and credit card advertisements is enough to give anyone a headache. You can be 10 pages deep into Google and still not have a clear idea of what to do and not to do when it comes to building credit.

The single most important factor in your credit score is your ability to pay money back on time.

Do you need me to say it louder for the people in the back?

When you receive any sort of bill, pay it in full and on time. I don’t care if it’s for your credit card, phone, utilities, or student loans; these are all directly tied to your credit score. This is adulthood and you need to be paying your bills in full, all of them. Partially paying a bill only hurts you in the long run. You’ll tack on a late fee, compounding interest, and your credit score will take a hit.

The second most important factor is your credit utilization.

What?

 

This is the amount of credit you use vs. the amount available to you. It’s ideal to keep this under 30%.

                Ex: You have a credit card with a $2,000 limit, you shouldn’t have a balance over a $600 in any given month.

However, the lower this number is, the better off you’ll be.

For beginners, I suggest closely monitoring your spending to make sure your utilization stays low. It takes some time to get used to calculating your funds when the credit card bill doesn’t come till a month after your purchases are made. My rule of thumb is to treat your credit card like a debit card. If you don’t have the money in your bank account to cover the purchase, you shouldn’t be making that particular purchase on your credit card anyway. You wouldn’t overdraft your bank account with your debit card, so why would you use your credit card any differently?

Once you get the hang of that, you could look into opening another line of credit. Opening another card will increase your credit limit, therefore lowering your utilization.

For example, I have two cards I use frequently. One offers 2x points on all purchases, the other offers 3x points on dining and travel and 1x points on everything else. My spending habits don’t change, but I alternate cards based on the better rewards for the purchase I’m making.

You should also never ever max out a card. Meaning if you have a $2,000 limit, you spend $2,000 in one billing cycle. This is awful for your utilization and subsequently, your credit score.

Other factors weighing in include your length of credit history. There’s not much you can do about this except open a line of credit and practice your loyalty. I opened my first credit card when I was 19. So even at the ripe age of 24, that’s still only 5 years of credit history. Lenders don’t like this.

 

The best advice I can give you is open a credit card and plan to use it forever and ever. The card I opened at 19 is almost useless when it comes to rewards and benefits, but my score drops if I close it. I pay my parking tickets on it just to keep the card active and ignore it otherwise.

Your types of credit are also factored into your credit score. Mortgage lenders especially look at this when you’re looking to buy a home. Your home loan will most likely be the largest amount of money you ever borrow, and banks like to see that you know what to do when it comes to monthly payments.

The good news is, if you’re anything like me, you’re probably sitting on a student loan. If it’s solely in your name (your parents didn’t co-sign) your monthly payments will help build your credit score.

The last factor is the number of opened credit lines vs. the amount of time passed. The general rule is 5/24. Building your credit score is a marathon, not a sprint. Lenders want to see that you’re taking things slowly and working up. Your credit score takes a small hit each time you open a new line of credit, but especially when you open more than 5 or so lines in 2 years. Credit card companies will often deny you if you’re over this 5/24 limit.

 

Even if you’re frustrated with your current credit score, it’s important to take things slowly and build credit properly. Do your research and open up a credit card. Keep your utilization low and make extra sure you’re paying the bill each month in full and on time. It’s 100% never a good idea to make just the minimum payment. Remember that building your credit score takes time and patience. We all start from the bottom, remember?


As always, the biggest thank you to Zack Mathis for the mad copy editing skills.