How to start to repair credit issues and finance a home a lot sooner. Bad credit might hinder you from purchasing real estate or for anything else for that matter, but even with no credit you can still buy your first home or investment property.
If you have clean credit, however, it makes buying a little easier. Lets look at what credit is and what one can do by establishing, building, and to repair credit.
The Credit Bureaus
Your credit can never be too good. No matter what your situation, you can always use clean credit. Whether you are new to an area, recently widowed, divorced, bankrupt, or you have a line of credit for 100,000+ and would like to double it, establishing or improving whatever credit you have is an important part of gaining an edge and capital in purchasing real estate.
We are all pretty much aware that information about our credit history is collected and stored in credit bureaus across the country. There are about five major credit bureaus that act as clearing houses for collecting information concerning everyone’s payment habits. Smaller bureaus receive their reports from these larger credit bureaus. Potential lenders and businesses can contact their local bureaus to receive a report about you to help them decide if you are a good credit risk.
Typical information included in the report are personal information such as your address, phone number, job title or description, and marital status.
The critical information included is payment schedules for loans and credit purchases, applications for credit, lawsuits, bankruptcies, and debts. Any information more than seven years old cannot be sent out. The exception to this rule is in the case of bankruptcy which stays in your file for ten years.
Credit bureaus do not verify or make value judgments about information they collect, It is up to your lenders to decide, based on their own criteria, whether or not to give you credit. That is why it is so important to make sure that your credit file is accurate.
By law credit bureaus must show your credit file to you and tell you who, if anyone, has asked for your file in the last six months. If you have tried to borrow money within the past 30 days and have been turned down for the loan, the credit bureau probably will not charge you to receive a copy of your file. Otherwise, there will be a charge of $10 to $15.Very few people do not have at least one blemish, small or large, in their credit file. Find out exactly what your credit profile is and whether any flaws that exist are correctable. For example, you may have purchased an item and charged it on you credit card. The item was defective, and you returned it. Yet, you are still receiving statements showing an outstanding balance.
Write a letter to your credit file at the national credit bureaus and explain this and every other similar situation you encounter. Notifying a local bureau will not change your records at all locations. Because the national bureaus are clearing houses, changing the file at these locations will be reflected in all the future requests for information they receive from smaller bureaus.
There is an old saying that goes like this “If you ever want to get something done right go directly to the source”. With that in mind, it doesn’t matter if you are trying to repair your credit yourself or use a professional credit repair firm, either way, you will have to have a starting point.
A proactive self help approach for anyone is to know exactly what is on your credit report. You have to know what is wrong with your credit before you can correct it.
Being a proponent of only certain clean credit repair companies and knowing that there are still many credit repair companies out there that exist for only one reason, to tap your pockets.
Many credit repair companies claim to remove negative credit no matter what the conditions. Their advertisements make bold assertions; “Bankruptcy, tax liens, judgments, . . . not a problem!! One hundred percent guaranteed!! Credit report 100% cleared in 30 days!!”….BULL! Any reputable company can not make claims like this without reviewing your credit file. Also look for money back guarantees.
Unfortunately, it’s risky to trust anyone to help you repair credit. It is estimated that credit repair companies have bilked Americans out of more than fifty million dollars. The majority of credit repair companies were started by entrepreneurs with a penchant for marketing. Consumers have flocked to these credit gurus only to discover that their advertisements proved far more impressive than their results. Hiring a company to repair credit is like playing the Lotto. Many of them are effective and legitimate, but it is difficult to tell a scam from the real deal.
Working within the credit bureau maze requires substantial background knowledge; knowledge it takes credit repair companies years to learn.
Methods to Help You Repair Credit
We recommend just two methods to help repair credit on this site, and for the foreseeable future, these are the only ones that we would dare to place our stamp of approval on because we know the quality of service that they provide. The first choice is a do-it-yourself, self help credit repair that provides you with all the information you need to repair credit and improve your scores as quickly as possible. Repairing credit on your own is not easy and can be a very time consuming task, but this repair service breaks down what to do and how to do it to help you learn the ins and outs of the credit system.
The second and final choice that we now highly recommend to repair credit is to get help from a professional law firm – which will take an aggressive stance to help you stop living with bad credit. A company has to work within the credit bureau maze and this requires substantial background knowledge that it takes companies years to acquire. Lexington Law Firm will repair your credit and has mastered that knowledge to make it quick and painless.
While there are many companies who brand themselves as clean credit repair organizations, most of them lack the legal clout and experience necessary to adequately represent your dispute efforts. Some of the specific advantages of using Lexington Law Firm are:
- They can dispute directly with the creditors and have the teeth to back it up.
- They force your rights under the various federal laws.
- They can do everything a non-attorney can do, and everything they can’t. For example, they can demand from a creditor and settle debts, cases where a non-attorney would not do you much good.
- Lexington Law Firm keeps abreast of current consumer laws as well as changes to, interpretation thereof, and applicability of those laws.
- They govern themselves according to the rules and principles of professional conduct.
- Lexington Law Firm practice the methodologies and structure like any law-practicing firm.
- Your case will be reviewed by an attorney who will impose legal opinions when and if necessary.
- Your confidentiality is protected by the attorney-client privilege.
If you know that you are in over your head and the pursuit to correct your credit is just to much for you to emotionally handle then turn it over to the only professional law firm that we highly recommend Lexington Law Firm, they’ll get the job done!
The Credit Pursuit Game
Another way to improve or establish clean credit is to go to two or three banks and open up a money market account in each. Find out the minimum amount for an installment loan each bank will make. Then, use at least that amount to open the accounts. If the minimum loan happens to be $1,000 per bank, open each of your money market accounts with $1,000.
About two weeks after you have done this, go back to each bank and ask to borrow the same amount of money you have on deposit. Offer to collateralize, or secure, the loan with your money market account. Make certain that each loan is an installment loan, of six months or longer. That way you can be certain it will do on your credit report. Bankers are very comfortable granting these loans because the collateral is right in their own bank. If the loan is not repaid, the bank has access to the money market account, making the bank’s risk minimal. You should not have to pay much interest either, generally 2% or 3% over what you are earning in interest on your account.
When the banker asks what you are going to do with the money, you could tell the banker that you are trying to develop credit with his or her bank. Reassure the banker that the loan will be repaid on time, if not earlier, so that eventually you could even obtain a mortgage from the bank. Because banks are in the business of making money, you will usually get the loan. The banker would not pass up an opportunity to make a profit from the interest your loan is generating.
When you have secured a loan at each of the two or three banks, take the money you borrowed and put it into another interest bearing account. You will use that money plus the interest it earns to help pay back the banks.
A week later you will receive a repayment coupon book from each of the banks. Every Friday for the next three of four weeks, tear off a coupon and make a monthly payment. You might even personally take one or two payments into the bank and give them directly to the loan officer. You want to get to know him or her and build a banking relationship. After this, make your monthly payments every month until the loan is paid.
Not only have you retired the loan faster than the period for which the loan papers call, but you now have two or three banks that you can list as credit references. When you do, be sure to give the name of the loan officer who worked with you. When people check with the loan officer about your credit, they will be told that it is excellent.
Once you have completed this technique, go back to the same banks and apply for a $500 unsecured loan for a period of 60 or 90 days. Be sure to repay them ahead of schedule. Then, go back to the banks about every six months and ask for increasingly larger amounts. This is known as establishing an unsecured line of credit. It can be very useful to you in purchasing real estate.
Overdraft Protection
When capitalizing on real estate investments it is essential that you have overdraft protection. The main purpose for this is to prevent you from writing a bad check that will have to be returned for non-sufficient funds. However, overdraft protection is also designed so that you can literally write yourself small loans with small monthly repayments.
Understanding overdraft protection is very simple. If you write a check over the amount you have in your checking account, the bank will automatically write you a small loan. This amount will be shown on your monthly checking account statement along with a preset interest rate that will be affixed to any loans you obtain with this privilege. You will be required to pay a percentage of this amount each month, like a credit card. The bank does not take money from your account to pay off your debt. Instead, you have to write the bank a check to cover either a portion or the full amount of the balance.
Most savings and loans and banks issue checking accounts with overdraft protection. It is literally a line of credit you have with the bank. Generally, when someone applies for overdraft protection, the institution will grant a $1,000 to $2,000 limit. If you establish yourself as an investor, your limit will mostly increase, otherwise this is a sound and secure way to leverage others money to obtain real estate.
To obtain overdraft protection, you will be asked to complete a credit application before being approved for the program. You must already have a good line of credit established. Depending on the institution and its policies, you may be charged an annual membership fee of $20 to $50, just like a credit card in some instances, however some don’t. Become aware of exactly what the banks in your area are offering and choose which is best for your needs.
Generally, a good rule to follow is to use your overdraft protection to pay for closing costs or down payments, and use your credit cards for fix-up costs. When using your credit cards for cash advances, a higher interest rate is charged than on the balance of your normal purchases. Instead of giving you a grace period of usually 30 days when no interest is charged, interest begins to accrue immediately. Lastly, a percentage of the money is also added to your credit card balance as a service charge for using the privilege. You can see why it would be wiser to use your credit card for fix-up costs where you will receive the30-day grace period and a lower rate.
The overdraft, on the other hand, works well with cash advances for down payments and closing costs. You have no extra percentage added to the balance as a service charge, and the interest rate is generally lower here than on your credit cards.
If your bank will not extend this privilege to you, then find a bank or savings and loan that will. You may start out with only a small amount of protection, perhaps $100 or so. Once you obtain it, though, continue to increase the limits and watch it grow.
Credit Lines From Suppliers
Another way to improve your credit is to open up a credit line or charge account with suppliers. Suppliers are usually the companies from whom you buy services and products. You will use them once you own investment real estate. Included in the list of suppliers to contact would be hardware stores, landscaping nurseries, carpet companies, locksmiths, plumbers, electricians, heating and air conditioning repair services, and building supply stores. If your trying to establish credit you want to focus on the MA & PA stores not the major chains.
When you approach these suppliers simply explain, “I am a real estate investor, I would like to open up a charge account with you. What kind of a courtesy trade discount do you extend?” You will be amazed at how many suppliers will not only agree to extend credit, but will also give you anywhere from 5% to 20% off their retail prices just because you are an investor and are considered a trade or business to business account. The supplier hopes to gain repeat business from you and your contacts. Most importantly, you will receive discounts because you asked for them and at the same time establishing credit relationships.
Repair Credit To Bad Credit Lenders