Learn to Manage Your Credit.
I have always said, “you don’t need good credit to get into Real Estate Investing”. But if you don’t have good credit, you are limiting your options. Without good credit you are limited to Nothing Down techniques such as Referrals, Assignments and Lease Options or you always have to use Investors or Partners which cuts into your profits. Just like education where The More You Learn, The More You Earn, the “better your credit rating the more you can earn”.
If you don’t have good credit, you should start repairing your credit immediately. There are a number of things you can do right away and a number of things you can start to do but will take more time. These are good habits that you need to establish.
- Pay your bills on time. Late payments can hurt your score. Always make sure your payments are made on time even if you can’t afford it. For example you will make you credit card payment but you may need to take out an advance after the payment (be very careful with this method and only use it as a short term or temporary method).
- Keep your balances low. At a minimum, it is best to keep them at less than 25% of your maximum credit. Or better yet, pay off your entire balance every month (see below).
- If you do not have a credit card, apply for one. Some banks have plans for you to be able to get a secured credit card. You can put up a deposit and you will be given a credit card equal to the amount of the deposit.
- Pay your credit card balances in full each month or, at least, pay off all the charges that you added for that month. This will keep the balances from getting bigger. Keep paying down the original balance as part of your monthly loan payment commitments.
- When you do obtain a consumer loan (car, boat, etc.), always get it from a bank. This will keep interest rates lower. Or better yet, save for your purchase and only make the purchase once you have saved the full amount.
- If you do have credit card accounts, especially older ones, do not cancel them. This maintains your good credit history and helps keeps your debt ratio lower.
- Keep credit inquiries to a minimum. Using a mortgage broker can help when applying for mortgages.
- Get a copy of all three credit bureau reports and clean up all incorrect items. Continue to check your credit report regularly.
These are just some of the good habits you can form when you are looking at improving your credit capability and credit score.