Looking for credit building strategies for real estate investors? Here’s an idea for improving your credit. Go to two or more banks and invest in a certificate of deposit (CD) at each bank.
Ask what the minimum amount is for an installment loan the bank will grant you, and then buy a CD for that amount. If each bank will make a $2,500 loan, buy a $2,500 CD at each bank.
A few weeks later, go back to each bank and ask the loan officer to make you an installment loan for the same amount you deposited in their CD and offer that CD as collateral. Ask that each loan have a term of at least six months.
Make sure each loan and your payments are recorded on your credit report. Generally, you should have no trouble acquiring a loan like this, because your collateral is already a liquid asset and is already on deposit with the bank that’s granting the loan.
If you default, the bank has nothing to lose because it can take your CD. That means your credit risk to the bank is almost zero. You will have to pay interest, but, but it should be minimal. Usually you can count on the interest being about 2-to-3 percent more than what the bank is paying you on your CD. This is the bank’s own margin of profit, but it’s still a fair price to pay for the improved credit rating it’ll earn for you.
If the loan officers ask you what you intend to do with the money they lend you, tell them. Tell them specifically you are trying to build credit with their bank. You will most likely get the loan you request.
Now, take the money these banks lend you and turn around and deposit it in other savings accounts at other banks! You can then withdraw some every month, plus the interest it earns there, to make your payments on time to each of the other banks that gave you the loans. Your objective is to build credit.
Comments on this entry are closed.