Homereal estate investingCredit is so important for real estate investors~


Credit is so important for real estate investors. We need it to
borrow money if necessary so that we can invest in more houses. Unfortunately,
people don't always understand what is involved in credit. Lucy Brenton draws
from her experience to "tell all"…


Why credit

Why do we even have credit scores to begin with? What was wrong
with the way our parents and grandparents did it?

Lazy underwriters

Banks save money

No personal relationship

Eliminates bias (which is good) but scores are proprietary (which
is not good)



Lucy helped a person with poor credit to get better credit by
showing them how to become an authorized user on good credit that is very
old. One way to do that, she says, is to become a joint account holder or an
authorized account holder on an existing credit (such as a credit card). The
example she gave is a person born in 1971 but has a credit history beginning
in 1977 because the credit report pulls the original date of opening that



Who uses
credit scores?

These are the people who are paying attention to credit. It's
imperative that you have good credit if you ever have to deal with them!



Financial organizations


Life insurance

Auto insurance


Factors that
determine credit score

All of these are critical to the health of your credit score.

Payment history: Have you paid your bills on time? Are you at
least making minimum payments on bills? Are all of your various credit accounts
(cards, lines of credit, loans, etc.) new or spread out?

Utilization: This is the measure of the amount of credit you have
available compared to the amount you have used. If your credit limit is $1000
and you've used $900 of that, your utilization is 90%. To improve utilization,
you can either pay down what you've used or you can increase your credit limit.
So if you want utilization at 50%, you can pay down what you owe to $450 or you
can get your credit limit increased to $2000.

Length of time: Those who are young and don't have a lot credit
experience will have a lower credit score than those who have a long track
record of successful borrowing.

Credit inquiries: Multiple inquiries is not good. Keep your credit
inquiries down because each one can count against you.

Mix of credit: Good credit means having a variety of loans
including mortgage, auto-related installment loan, credit cards (an optimum
number of 3).



Under the FACT Act you are entitled to receive 1 free credit
report each month from each of the 3 credit bureaus. Be careful of sites that
claim to provide you with free scores because they do not have access to the
proprietary algorithm or the score.



"These are mathematical algorithms. They don't give us
access to it. The average consumer is completely controlled… in their ability
to obtain credit… So something that affects us greatly, the average person
can't even influence."


credit scores

Some people read credit scores and simply make their decision
based on the score but Lucy suggests reading the details. She can see even bad
credit reports and see what's really there. She'll look for:

Look for elements that are not a reflection of the person's
character or their ability or willingness to pay.

Dates of items reported, especially the last active date.

Dates that accounts were opened.

High limit and high balance and utilization.

Credit history: Number of months reviewed. The longer accounts are
open and the longer accounts are paid on time, the better the credit.


Items that
negatively impact your credit




Late payments (mortgages, installment loans, revolving credit)



Add to Your

To-Do List

Pay items down quickly

Get your credit limit increased

Keep your credit separate

Get non-recourse loans (they are rare but you might be able to
get them)

Become an authorized user



For more information, go to Lucy Brenton's


About this star: Lucy Brenton is a credit coach who
has helped many people to improve their credit and borrow money. She talked
to Investing with the Stars about how real estate investors can improve their
credit rating to get better credit (and lower interest rates).




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