30 Apr Manage Your Credit Score: Real Estate Secret
As a real estate investor, your credit score is going to become a key to better loans. Knowing how to manage your credit score is vital. I have three tips I’ve developed over my time in the business that I believe will help you manage your credit score properly!
Keep your credit card balances no more than 50% of available credit! But really, the best case is to keep your balance no more than 33% of whatever your available credit is. So if you have a $10k limit, it’s best not to owe more than $3,300 at any given time.
As an investor, refi’s are important to keep your money working. You want to buy the property on 60-80 cents on the dollar and you want to have paid 3 months of mortgage payments. Once you refinance, you want to make about 90 days of payments before you try to refi another property or a group of properties. So allow 3 months of mortgage payments to be made before refinancing another property.
In this process, you bring your credit score back up. Every time you refinance, especially if you refi several properties at a time, your credit score can take a 20-point hit—even if you’re doing everything right! So allow that three months and those 20 points will come back up. And then you can refi again.
Here’s a real nugget: form a corporation and have your autos and lines of credit put in the corporation’s name. Then be clear when getting loans that you do not want them reported on your personal credit at all.
I actually have, with an automobile company, no personal guarantees signed on the loans. The national credit company with that auto manufacturer has made me the loans strictly in my corporation’s name. I have done business with them for a long enough time that we’ve established this trust. What does all that mean? I do not owe anything against myself on anything with this automobile company.
You can also do lines of credit in a corporation’s name, after you’ve established your reputation. And then I just always ask them to not report these things on my personal credit report because I do not personally own the money. Yes, I own the company. But the company as an entity acts as a third-person. And therefore you are able to make loans and it doesn’t show up on your credit reports.
Have you ever experienced a credit disaster? Share your story in the comment section below!
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