- Hey everyone, it's Clint Coons here
with Anderson Business Advisors, and in this video,
we're gonna discuss how to improve your credit score
so you can do more real estate deals.
All right, let's get started!
(upbeat rock music)
Okay, so here's the deal, right?
You've got credit cards, everyone has them.
Now the thing is is that what you're doing with those cards
can either impact your credit in a positive or negative way.
Now as real estate investor, if you're gonna borrow money,
you gotta have a good credit score, it's just the way it is.
Until you get up into those larger loans
or it's an asset-based only loan
and they're only looking at experience,
and until you're there, you gotta keep that credit score up,
I mean, let's face it, Chase has already come out
and they said they're increasing their credit requirement
in order to issue loans to certain individuals.
You gotta be at 720 is what I read.
If you're not at that point, well how do you get there?
Or how do you bump it up higher, so you can do more deals?
'Cause this is an unprecedented time in our history again,
that we're gonna be going through,
and there are gonna be deals out there.
The question is, are you gonna be ready to take action?
Will you be in a situation where you can walk in
and you can get that loan because you've done
everything that's required to make sure that you qualify.
So, what are some things that you can do?
Three easy steps to improve your credit score.
Number one, pretty simple, you probably already know this,
reduce your balances, okay?
So if you're carrying a lot of balances -
number one, if you've got a lot of balances
on your cards, let's pay them down.
How do you pay them down?
Well you can go and you can borrow
from your qualified retirement plan if you have a QRP,
you can take money out of a IRA right now.
I've got another video just on the CARES Act
and how it applies to IRAs and QRPs,
how you can access these to pay down these cards,
and that will help improve your credit score.
So that's one easy way.
A second way in which you can help improve
your credit score is to pay your balance off
or pay it down before the settlement date.
So here's how it works with the credit reporting bureaus;
if you have a credit card, and let's say
you have a $14000 balance on it,
and you just, you know, you put money on it
to rehab properties and you pay it off every month,
and you may think, well, I have zero credit
that I'm using right now because I pay it off every month.
Well, that's not the way it gets reported.
You see, when your credit statement ends,
let's say it's the 20th day of the month,
your statement comes out, you get it on the 25th,
and you have until the 18th of the next month to pay it off
and you pay it off by the 12th, all right?
Does that help you?
No, because when your statement date ends,
and wherever your statement date is,
let's say it was the 20th, it's going to show -
they're gonna report you have $14000
of your credits being used right now.
So, if you wanna help improve your score,
you need to get that payment in before
that statement period ends, and the way you do that
is you actually go online and you prepay,
or you make a payment before the the ending settlement date.
That's the simplest way to do this.
And so then what happens when they send out that statement?
Let's say you paid off $10000, you only owe $4,000.
The only thing they're gonna report to the credit bureau
is that you have used 4000 of your available credit.
So making sure you pay that down.
Now, another reason why that's important is because
they wanna look at your overall credit utilization.
If your credit utilization is too high,
that reflects negatively against your credit.
I've been there before.
I was of the mindset, hey, I pay my credit cards
off every month, I put all my business expenses on them
and then I pay them off when the statement came out.
And I figured out my credit score
was not as high as I thought it should be,
and that was one of the main reasons why, the main culprit.
So you gotta get in there, put all your credit cards up
and look it up online to see when that statement date is,
and then make sure you're paying those down
before the end of the period.
Okay, the third method, which actually helps you
on the first method as well,
is to make sure you have business entity set up.
Many of you already do that watch these videos,
you have a corporation,
you have a limited liability company.
But have you ever thought about getting
a business credit card for those entities?
If you haven't, you should.
The first thing you should do is go out
and apply for credit cards for your business entities.
Now, when applying for those cards,
you wanna make sure you're applying with an institution
that does not report back to your credit profile.
You will have to give a personal guarantee,
they will do a credit poll in order
to determine your available balance,
so that will take an initial hit for you,
but going forwards, any amounts
you put on those cards, well guess what?
That doesn't report back to you.
So if you're an avid real estate investor
and you go out and you put all of your costs,
all of your materials, on your credit card,
'cause you want to get the points, I mean I love points,
but then the point I'm trying to make is this,
is that if you're not paying it off every month,
especially if you're in the middle of a rehab,
you know, you've gotta wait for that cash to come in
before you can pay off that entire card,
well that's gonna hit your credit score.
But if you're doing it with your business card,
it's not being reported back to you.
So the way you can actually improve
your personal credit score sooner
with existing balances you have,
open up those business accounts under your business entities
and then roll the balances, get those balances transferred
off your personal cards and onto the business cards.
And then when the banks start reporting back,
you won't be using as much as your available credit
on the personal side, and eventually you're gonna see
your personal credit scores start to go up.
The reason I wanted to bring this video to you is that,
there are gonna be a lot of opportunities coming up here,
and credit is always gonna be important,
especially when you're in times like this
where people, where lenders, are unsure
about an individual's ability to borrow
and repay that mortgage, having that better credit score
can mean the difference between you getting the loan or not.
So those are three simple steps you can utilize right now
to help improve your score, go out there,
take advantage of it, and I wish you all
the best with your investing.
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