Investing with Bad Credit: How Can You Raise Your Score Fast?
Real estate investing with bad credit is tough. Here’s how you can raise your score.
Loans fuel your real estate investment business. The easier, faster, and cheaper you can get money, the more successful you’ll be. How can you guarantee you’ll get money from lenders easily, fast, and cheap? Having a great credit score is the best place to start.
But if your credit score isn’t what it should be, how can you succeed?
Why is Your Credit Bad?
First of all, why is your credit bad? Knowing the answer to this question is the key to your investing success.
Who Won’t Succeed in Investing with Bad Credit
Habitual bad credit is a problem. If you’re the type of person who:
- Doesn’t pay bills because you “don’t want to”
- Refuses to believe that improving your credit score is important
- Can’t or won’t keep track of personal finances
…then real estate investment probably isn’t for you.
The money side of investing is huge. If you’re unable to pay attention to the numbers, pay your debts, and prepare your money, you won’t succeed in real estate. And if you aren’t willing to improve your bad credit, it will be nearly impossible to get money to buy properties to begin with.
Who Can Succeed Investing with Bad Credit
However, many people have the potential for a great credit score. But maybe your credit was impacted by a major life event:
- A divorce
- Medical bills
- Lack of credit education
Any number of life events can turn a responsible, willing individual’s credit bad – including never being taught the importance of credit.
Whatever your situation is, now is the time to focus on your credit score. You can come back from any dip in credit if you’re willing to put in the time and effort.
And if you want to invest in real estate, credit is vital. Your credit will either propel you to success, or drag your career down. Let’s get it fixed.
How to Raise Your Credit Score
Improving your credit score is relatively simple – anyone can do it, if they’re willing. All it takes is getting educated, then spending 30 to 90 minutes per week.
It could take you up to six months to bump up your score in the long-term. But if you don’t start now, it’ll keep getting harder to raise it. The best time to start fixing your credit is now.
Lenders look at credit to see how you paid people in the past as a clue to how you’ll pay them in the future.
If your credit is just “dinged up,” there are three quick solutions to improve it.
1. Get Your Credit Balances Down
We often see investors and contractors put all renovation costs of a job on their credit cards – especially for BRRRR projects. They use more and more of their credit, which drags their score lower and lower.
This is a tempting yet dangerous pattern as a BRRRR investor. You put your money into the property from your credit card, which you expect to get back with your refinance. But if your credit score is too low, the refinance might not go as planned. With bad credit, you won’t be able to get the refinancing loan as easily or for as much money as you expected. This will make it harder to pay off the card balances you built up during the rehab.
A tip to get around this problem is to go private. If you can get a private loan that won’t show up on your credit, you can use that money to pay down your balances.
A better score will give you better rates for your long-term, credit-based financing. A lower credit score could make your loan rate a point or two higher, which could snowball into you paying an extra $50,000 to $70,000 over the life of the loan.
2. Get Authorized
Another quick fix for a low credit score is using someone else’s good credit to help your bad credit. Find a family member or friend who has good, long established credit, and ask them to add you as an authorized user. Their good credit will show up on your report and boost your score.
3. Pay Your Bills on Time
If you can’t keep up with your bills, that may be a sign to get rid of some of your credit cards. Some of our clients have over 20 credit cards open! Consolidate your accounts as much as possible.
But when you stop using an account, don’t close it. As long as it has a good history, an open, unused credit account will continually add a little boost to your credit.
Turn Bad Credit to Good Today
To get into investing with bad credit, the best step is to focus on raising your score.
It can be overwhelming, but just dive in. Ask for help – from trusted family, friends, or Hard Money Mike.
Or, if you have major credit issues dragging you down for the long-term, you may need to reach out for advice from a professional. Spending a couple hundred dollars now will pay for itself later in your great real estate investments made with a high credit score.
To start working on your credit score today, download this free credit score checklist.
Watch our videos on credit here.
Let’s fix your credit score fast! Happy Investing.
