Low Credit Score: A Quick, Easy Solution

Low Credit Score: A Quick, Easy Solution

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Low Credit Score: A Quick, Easy Solution

Do you have a low credit score? If you do, then it’s likely making a big dent on your cash flow. Because a low score means paying higher rates. And higher rates mean less money in your pocket.

 

 

 

 

 

 

 

 

 

 

At Hard Money Mike, one of the main questions we hear from real estate investors is, “What credit score do I need to get a loan?” And when they hear the answer, many of those investors are unhappy about it.

Because they have a low score…too low for a traditional loan, at least. And traditional loans have some of the lowest interest rates available.

But, why is your credit score so low?

Well, there’s some common issues you probably already know about (ex: unpaid bills, late payments, etc.). But did you know one of the biggest issues is high credit card balances?

 

Yes, even if you pay some of your credit card off each month, as long as you maintain a high balance, then it’s going to ding your credit score.

For example, if you have a maximum credit line of $8,000, and you maintain a $6,000 balance, then creditors think you’re a high risk. Therefore, they penalize you by taking points off your credit score.

To make matters even more frustrating, many real estate investors have to use their credit cards to pay for renovations on a value-add property. Otherwise, their project might stall.

What can you do?

Well, technically, the best solution is to get a loan to pay off your credit cards.

But, if your score is too low, you won’t be able to get a loan.

AHHH!

Yeah, it can be a real conundrum. And we’ve seen it impact our clients countless times. So, here’s our suggestion:

Take your loan private.

Don’t go to a bank or another traditional lender. They will just reject your application. Instead, find someone (like Hard Money Mike) who can help you repair your credit score by setting up a private loan. That way you can:

  • Pay off your credit cards
  • Raise your score
  • Get an affordable loan AND rate

After you pay off your credit cards with a private loan, you can resume normal business. Just remember to keep your credit card balances as low as possible. In other words, don’t use more than 20-30% of your credit line. If you exceed that threshold, then quickly pay off what you can to drop it back down and protect your credit score.

Because a good credit score will lead to the best loan products. And the best loan products will produce the highest cash flow possible.

Happy investing!

Credit Score Basics: How Lenders Use FICO Scores

How Lenders Use Your FICO Score

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How Lenders Use Your FICO Score

Do you know how lenders use your FICO score? Because it’s vital to whether or not you get approved for a loan.

If you understand credit score basics, then you’ll have a much better chance of hearing a “yes” rather than a “no” from a lender. You’ll also gain a much deeper understanding of how your score impacts your monthly payments.

You see, when you have a decent credit score (700+), then you can expect to see more loan approvals. Especially from traditional lenders, like banks.

Plus, a good credit score will lead to good rates. And that means cheaper bills.

For real estate investors, a good credit score can make all the difference between positive and negative cash flow. And over time, that kind of business model can run you…well, out of business.

If you’d like a quick overview of how credit scores work and how lenders use them, then check out this explanatory video from FICO.

In this video, you’ll get a simple and fast explanation of how credit scores work. Again, this is vital if you want to succeed with your real estate deals. And your overall financial health. Your wallet will thank you for taking such good care of your credit score.

If you want more credit score tips, check out our Youtube channel! As we’ve stated throughout this article, we highly encourage you to understand the importance of your score so when it’s time to get a loan for your next value-add property (fix and flip or rental), you’ll have lots of options. And access to great rates.

Need some extra input on your credit score and how you can raise it? Our team is always here to offer advice and guidance.

As always, happy investing!

How To Make $250,000 with a Good Credit Score

How To Make $250,000 with a Good Credit Score

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How To Make $250,000 with a Good Credit Score

Did you know you can make $250,000 with a good credit score?

Yep, that’s right.

But, how?

Well, let’s pretend your credit score is fishing bait. If you have good bait, then you can catch something big and juicy. But if you have bad bait, then you’ll walk away from the pond with nothing but a sunburn and bug bites.

Yuck!

So, what creates a good credit score? Well, it depends on what you have in your tackle box.

A well-equipped tackle box includes:

  • Monthly bills that get paid on time
  • Credit cards with 30% (or lower) credit usage
  • And a diverse credit mix. That means you have multiple types of payments, like a house, a car, insurance, credit cards, etc.

When you have good bait in your tackle box (aka, a good credit score), then you can live the life you want. That means owning a house, a reliable car, a fat retirement account, and many–MANY–other things. The world is your oyster when you have good credit.

Because the higher your score, the lower your rates. And the lower your rates, the bigger your bank account.

In fact, if you have a 760 or higher score, then you can reel in an extra $250,000 by the time you retire.

But if you have a score under 650, then you’re going to have a tough time catching anything in life’s pond. Because lenders don’t like subpar credit scores. When they see your low score, they’ll reject your application or charge you expensive rates.

But don’t worry!

If you want to fish with the good stuff, then you just need to focus on raising your credit score. And it’s not all that hard to do so. It just takes a few quick, easy steps to boost your number. For example:

  • Pay your bills on time
  • Keep your credit usage under 30%
  • Get a loan to help you pay off your credit cards

Check out some of our other videos for credit score boosting tips.

Everyone deserves to own a shiny, well-equipped tackle box (er, credit score). If need advice or want to chat about yours, our team is here to help.

Happy investing!

What Is Bad Debt Versus Good Debt?

What Is Bad Debt Versus Good Debt?

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What Is Bad Versus Good Debt?

So, what is bad and good debt?

Well, before we jump into that, did you know there are two types? Because most of us were raised to believe ALL debt was bad.

But no. That’s not true. At all!

In fact, good debt is necessary to build your credit score. Without it, you can’t boost your FICO score and obtain low-rate loans for things like fix and flips, rentals, and other value-add properties.

So, now that you know there is such a thing a good debt, let’s look at the difference between the good kind and the bad kind…

As you can see in the image above, bad debt is essentially any kind of consumer good. It’s something that doesn’t create cash flow. So, think about your vacations, cars, TVs, clothing, etc. They’re fun to have but not helpful to your bank account.

Good debt, on the other hand, pays for itself AND generates a profit. The best example is a real estate property. If done right, you’ll gain equity on most of the properties you purchase. It can be instant equity (aka, a fix and flip) or long-term equity (your personal home that has a 15-30 year mortgage). But, as long as you pay your monthly mortgage, owning a home tends to be a great investment.

So, the next time you hear the word “debt,” don’t cringe. Instead, ask yourself, “Is this the kind I want?”

If it’s bad (because nobody can get through life without having some bad), stop and ask yourself this: “Is this something I need?” Or, more importantly, “How quickly can I remove this from my credit history?” In other words, how can you pay for it without using a credit card? Because as long as you pay your bills and maintain a healthy credit usage (under 30%), even bad debt can be okay.

It’s all about balance and healthy finances!

Have questions? No problem. Our team is always here to chat.

Happy investing!

How Your Credit Score Can Make You Thousands of Dollars

How to Make Money with Your Credit Score

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How to Make Money with Your Credit Score

Today, let’s chat about how to make money with your credit score.

Your credit score is kind of like a baseball game. With it, you can knock it out of the park and enjoy great success with your finances. Or you can strike out, and–well–lose (ouch).

 

When you “win” the credit score game, you win countless opportunities. These include:

  • The best interest rates
  • Affordable loans
  • And, in the end, hundreds of thousands of dollars.

Yes, you read that last one right. Hundreds of thousands of dollars. Because a good credit score means cheaper rates. Which means cheaper bills. Which means you save A LOT of money over the years.

Before we go on, let’s talk about what a “winning credit score” look like.

Winning Credit Score

Most lenders like to see scores in the 700’s or higher. Anything lower will likely lead to rejections and expensive rates.

But what if you have a score under 700? Nobody wants to walk up to the plate and strike out, right?

Well, let’s take a look at 3 strategies to help you prepare for this financial ballgame.

Increase Your Available Credit

Pick up the phone and call your credit card company so you can apply for a higher limit. Why? Because then it’ll be easier to keep your credit usage at or below 30%.

What do we mean by that? Well, let’s take a look.

If your credit card balance is $8,000 and you have a maximum credit line of $10,000, then creditors can see you’re using 80% of your available funds. Yikes! In their critical eyes, this means you’re a risk–a BIG one–and you might not be able to meet your financial obligations (i.e. you won’t be able to pay them back).

Not good.

Now, if your credit card balance is $3,000 and you have a maximum credit line of $10,000, then creditors see you’re only using 30% of your available funds. That’s much, much better. In fact, it could be a home run in the eyes of lenders.

Because when you manage your credit usage, creditors will think you’re financially responsible. AKA, you pay your bills. And that will lead to more loan approvals and lower rates.

Yay!

Pay Extra

A large chunk of your credit score revolves around your monthly reported balances to the credit bureaus.

So, it always helps to pay extra on your credit cards before your next statement. If you do this, the credit bureaus will be happy with you. Very happy! That means your score will rise.

Now, if those first two strategies don’t work for you, then you can always take a more creative third approach (one we’ve recommended to many clients).

Get a 60 to 90 Day Note

Basically, you can get a loan to pay down or pay off your credit cards. You can get one from a bank, a family member, a friend, or a private lender. This way you can keep your real estate projects moving along and your cash flow, well, flowing.

Make Money with Your Credit Score

If you take one, two, or all three of these steps to boosting your credit score, then you’ll have a much better chance of getting lower rates and generating thousands of dollars over time.

And if you play the game right, you can knock it out of the park and make hundreds of thousands of dollars!

Happy investing!

Understanding Your Credit Card Debt And Your FICO Score.

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Understanding how your credit card debt is affecting your FICO score matters, and as a real estate investor as it can save you or cost your thousands of dollars!!