Tag Archive for: usage loan

How to Raise Credit Scores in 30 Days or Less

Everyone in real estate investing knows the power of credit scores. But how can you raise credit scores quickly so you don’t miss out on deals?

The best part of real estate investing is that anyone from anywhere can begin building wealth if they know how to use leverage.

One of the biggest pieces of leverage in an investor’s toolbox is their credit score.

Your credit score can be the difference between a deal that makes you rich and a deal that puts you in debt. With a good score, you’ll likely find better terms, rates, and points.

However, if you’re struggling with a low credit score, what can you do to fix it? And how long is that going to take?

Identifying the Problem

If you’re using your personal credit card to cover the expenses of real estate investing, chances are you have a usage issue.

Your credit score is calculated based on the balance between two items: 1) available funds, and 2) how much of those funds you’re using (usage). If you’re constantly using all—or nearly all—of the available funds, credit companies see you as a risky investor. This lowers your score.

If this sounds like you, that’s great news! There are fairly painless ways to fix usage issues.

Unfortunately, if your score is low because you’ve struggled with late payments, there is no quick fix for that. Only time can remedy the damage caused by bad payment history.

A Quick Fix to Raise Credit Scores: Usage Loans

A usage loan pays off your credit card, transferring the balance to a private loan that doesn’t report to your credit score.

Many companies and individuals, including us, offer usage loans, and we’re happy to talk about your options at Hard Money Mike.

Usage loans have a near-instant affect on your credit score. You’ll see the change as soon as the next report processes. If you want to see how much your credit score could change if you pursued a usage loan, you can use tools on sites like Experian or Credit Karma.

If your score is low, and you’re convinced that the next deal will fix everything, here’s our advice:

Don’t play credit roulette.

Don’t put your credit score at risk while you wait for the next deal to go through. Get ahead by protecting your credit score with a usage loan.

A Long Term Fix: Business Credit Cards

Once you revive your credit score with a usage loan, what can you do to protect your score long term?

It’s pretty simple: Transfer your real estate investing to business credit cards.

Business credit cards (if you find a good one) won’t report on your credit score. Additionally, because their purpose is different, credit card companies sometimes reward high usage on business accounts even though they penalize private accounts for the same activity.

You still need to pay off these cards on time. But as long as you’re doing that, you protect your personal credit score from jeopardizing your deals.

To learn more about business credit cards or how to find the right one for you, check out our sister company, The Cash Flow Company.

We Can Help

If you want to explore a usage loan or have questions about how to raise credit scores, feel free to reach out to us at Info@HardMoneyMike.com.

We’re always happy to walk you through your options. Our goal is to help you find the right loans and solutions that fit your needs.

Happy investing!

How to Raise Your Credit Score with Hard Money

If you’re struggling with knowing how to raise your credit score, it might be time to check out a hard money usage loan.

Real estate investing is all about creative wealth using available leverage (other people’s money in the form of bank loans, hard money, etc.) to make a profit. It’s an accessible and lucrative field for first-time investors. 

However, a bad credit score can change the game.

Especially if you’re looking for larger, traditional loans, a bad credit score can immediately disqualify you from consideration.

But there is good news! Hard money (sometimes called “private money”) can save the day. 

The Cost of a Bad Score

A bad credit score (anything below 670 is often considered “poor”) can lower the quality of deals you find. If they do approve you for a loan, a bank will likely ask for an additional 10-20% down. 

You might be stuck with higher rates on a DSCR loan.

At worst, you won’t be approved for a loan at all.

This is both frustrating and very expensive.

How do Credit Scores Work?

Your FICO score is essentially based off of 5 categories:

You’ll notice that the vast majority (over 2/3rds) of the score comes down to just 2 components:

  1. Payment History
  2. Amounts Owed (Usage)

If your score is low because of payment history, then there isn’t much we can do to fix that with a hard money loan. That’s a problem that takes time to resolve.

However, if your score is low because of the usage, hard money can provide a very quick fix that can raise your score in as little as 14 days.

What is Credit Usage?

Credit usage (that Amounts Owed section) measures the ratio of total money you could use with how much you do use

Essentially, if you have a total available balance of $1,000 and you’re constantly maxing out that credit card, then you have 100% usage.

Credit card companies typically like to see usage around 30%. If you’re new to the investment game and you don’t have constant cash flow from current properties, it can be really tricky to have optimal credit usage.

How to Raise Your Credit Score Using Hard Money

You can use a hard money usage loan to pay off your credit card. 

This lowers your usage percentage almost instantly which in turn boosts your credit score. Because hard money loans move quickly, you could see your credit score go up in only a few weeks—we’re only waiting for the next statement to be processed!

Once that credit score is back above 700, you shouldn’t have a problem getting your next necessary loan and getting a good deal.

You should also consider opening a 0% business credit card.

The Cash Flow Company encourages moving expenses to business credit cards. This protects those higher real estate investment expenses from reporting on your personal credit score. 

Reach Out if You Need a Usage Loan!

At Hard Money Mike, we offer secure usage loans for investors looking to fix their credit scores.

Also, make sure to check out our free tools. Our loan calculators in particular can help you find the best loan options for your projects. It’s important to shop around as you invest and create wealth.

If you’re looking to raise your credit score fast, reach out to us at Mike@HardMoneyMike.com, and we’d be happy to discuss a deal.

How to Make Real Estate Financing Easier: Simple Way to Raise Credit Score Fast

Raise credit score fast with this simple investors’ trick.

New and seasoned investors alike prioritize one thing in real estate: financing.

Available, fast, cheap funds are key to a smooth career. And a high credit score is key to smooth financing.

We see investors make one key mistake that wrecks their credit score: they use personal credit cards for business expenses. This one mistake costs people tens of thousands of dollars in quality financing.

Let’s dive into this mistake and see what simple options you have to raise your credit score fast.

How We Help Raise Credit Scores Fast

Just this week we’ve closed two different loans to help clients raise their credit score.

They both needed long-term loans for the rental properties, but their scores were too low from the high usage on their personal credit cards.

We also just had an inquiry from another lender who’s looking for us to help their client pay off his credit cards so he could qualify for their loan.

What Causes a Low Score for Investors?

What causes this issue?

The #1 factor that determines credit score is payment history. On average, investors are responsible about timely payments. So what gives?

The #2 factor deciding credit score is your credit usage. This is the ratio between your current credit balance and your total credit limit. Investors often use personal cards to fund rehab on their projects, which rapidly raises their credit usage.

Let’s talk about the solution.

How to Raise Your Credit Score

If your problem is high usage, there are just a few steps you need to take that will drastically improve your credit score (and financing opportunities).

Firstly, you need to stop using your personal credit cards for business purposes. Treat your investments like a business. There’s no reason fix-up costs should impact your personal finances.

Secondly, get a usage loan to get your personal balances down now. When that money doesn’t report on your credit, your score improves almost immediately.

Lastly, open a business card to use for projects moving forward. Once your credit score is back in a good spot and you have a functioning LLC, apply for a business credit card. Balances on this card won’t reflect on your personal credit.

We’re happy to give you a hand at any step of this process.

How to Move Forward

Leverage is king in real estate. As the markets stay tight, interest rates stay high, and bigger institutions elbow their way into the lending space… Credit score only gets more important.

We don’t want to see a low credit score be the reason you don’t succeed in real estate.

If you need any guidance on your financing journey, don’t hesitate to reach out to us.

Want more info on business credit cards? Check out this video on our YouTube channel.

What Is Gap Funding? (What to Do When Your Main Loan Leaves Gaps)

What is gap funding? Let’s go over 4 types of small loans: bridge, reserves, rehab, and usage.

The gaps lenders leave on real estate projects are getting bigger.

They’re asking you to put more money in. Leave bigger reserves. Have better credit scores.

We see this daily as we help clients with small loans. Let’s go over some of these small loans that we call gap funding:

  • Bridge loans
  • Reserves
  • Rehab costs
  • Usage loans

Bridge Loan Gap Funding

Bridge loans: if you have a project that’s either on the market or going on the market, but you need to get into your next project. You have to keep making money, but your capital is tied until that first property sells. 

These bridge loans are usually between $10,000 and $75,000, used for a down payment on your next project.

How it works: you put a lien on both properties, then when the first one sells, you pay off the bridge loan. This can keep you going from flip to flip with no pause in projects.

Reserves

Another spot in the real estate investing process for gap funding is reserves. Banks are requiring more money in reserves to cover any unknown expenses or payments.

We just did two loans to help with reserves. 

One was for a flip. Someone needed to borrow money. They had a property on the market. They’re buying their next one, but the lender that was funding their new deal required six months of reserves. We did put a second mortgage, on the property. When it sells, we’ll get paid off, and they’ll be onto their next deal. 

The second was an investor who needed reserves for a long-term loan. He was refinancing his investment property, but he was short on reserves. We were able to use another property in his portfolio to do a loan. Once the cash-out refinance is done, he’ll pay us back.

Funding Gap in Rehab Budget

Maybe your primary loan didn’t cover as much of the fix-up process as you ended up needing. This is another instance where gap funding comes in handy.

We also had another unique situation with a client recently. The borrower got the money in their escrow account when they set up the loan… but the lender would not release any escrow funds until he did at least a quarter to a half of the project. Yet he couldn’t start the project because he needed the funds from the escrow.

We stepped into this chicken-and-the-egg situation and helped him with a lien on another property to give him the funding he needed to kick off the project. When his other lender released the escrow, he was able to pay us back.

Usage Loans

Sometimes the requirement from banks that kills investors is the credit score limits. For many investors, this means their credit usage is too high – since they use lines of credit for their real estate projects.

We had a client out of Michigan who was trying to get a DSCR loan. He bought a property, fixed it up, and was going to do a DSCR refinance to get all his cash back.

But he used all personal credit cards for the project. This tanked his credit score. So when he applied for the DSCR loan, he was at an almost 10% interest rate with 3 points.

To help him, we did a quick usage loan to pay off those credit cards and let his credit score go back up. Then he can get into a long-term loan at a good rate with fewer fees.

Other Small Loans for Gap Funding

We’re able to help people in any of these circumstances who need a small gap funding loan.

In fact, in any situation where you need a loan and have a good property to put a lien on, we may be able to help you.

If you have any questions on this or other loans, reach out to Info@HardMoneyMike.com.

Happy Investing.