Ultimate Guide to Ultimate Credit

Ultimate Guide to Ultimate Credit

Having good or bad credit impacts the kind of loan you will get when you buy a car or house for example. Having bad credit can potentially deny you of getting loans, and or you will receive one with a high-interest rate which means more money coming out of your pocket. 

There are primarily 5 main things you need to worry about when it comes to achieving and maintaining good credit. A score of 740 or higher is considered very good or exceptional. This is how you can get your credit above 740, it only takes 5 steps.

1. Payment History

Keeping up with your payments is extremely important. A missed payment can result in a heavy penalty. Just making the minimum payment is good enough to have a good payment history. However sometimes just making the minimum payment isn’t enough to raise your credit as you will learn below.

2. Credit Usage

This is the most difficult part as it determines how much of your credit card you used. Your credit score will suffer if your credit cards are maxed out, even if you are making the minimum monthly payments.  Generally having used 20% of your credit card or less will positively raise your credit score by a good amount. This is the most important one to keep in mind as it impacts 30% of your score. If your credit cards are maxed out, stop using them and pay them off immediately. Hide or cut up your credit cards if it helps you not use them! 

3. Credit Age

This is why it is important to start building credit at a young age. Credit history accounts for 15% of your score and it helps to have an average account age of 3-5 years. So if you have old credit cards that you don’t use make sure to keep them open so your credit history isn’t affected!

4. Account Mix

This part is like playing the bank’s game. The more loans and credit cards you have the better it reflects on the banks, especially if you are paying them off on time and keep the credit card use to no more than 20%. Generally, car loans, credit cards, mortgage, auto loans, general loans, and student loans impact your score positively. 

5. Credit Inquiries

Credit Inquiries is the number of times you have asked for a loan in the last 12 months. It's best to stay under 1-2 times. However, if you want to apply to a new credit card, auto loan, and mortgage in the same 12 months, this will only negatively affect your score. And because it only impacts your score by 10%, it won’t affect it much at all. Just be sure to keep your loan requests to a maximum and with good reason. 

Why you should start building a good credit score?

Having and maintaining a good credit score will open many doors of opportunities for you. If you need a loan for your first home purchase or real estate investment you will need a really good credit score. Having good credit will give you more loan options, cheaper interest rates, and more opportunities. Take the advice above and start building an excellent credit score today!

Why Investing in Real Estate is Better Than a Retirement Account

Why Investing in Real Estate is Better Than a Retirement Account

Looking to invest and multiply your hard earned money? Here are three amazing reasons why you should consider investing more money in real estate, instead of a retirement account.

1. Cashflow

Why investing in real estate will make you more money both short and long-term.

The purpose of a retirement investment account such as a 401k or Roth IRA is to stash away money in the stock market until the age of retirement. These accounts are tax-free which makes it very appealing to the average investor. However, you cannot take funds out until age 65 or else you will incur a tax penalty. 

Meanwhile, Real Estate Investing provides a monthly cash flow going into your pocket everytime rent is paid. If you manage to buy several properties by retirement you should be able to make more money passively than your day-to-day job. Your money will constantly grow under real estate, but with a retirement account, your money will slowly be eaten away as soon as you retire. 

2. Leverage

How can you make more money with real estate?

Once you purchase a property you start building equity. This equity can be used to purchase another property, which will provide you with more cash flow and equity later down the line. As long as you can afford the costs, buying more properties is essential for growth and diversification. 

In the long run, you will be increasing your cash flow, especially when you refinance your loans on those homes. Make sure you do not over leverage as that would increase your exposure to greater risk. Not every tenant will renew their lease so expect some properties to go vacant for a little while.

Now although that recession was caused by a real estate bubble, I want to reiterate that there is a difference between investing and speculation. People who buy real estate hoping it will increase in price is called speculation. When the real estate bubble popped in 2008, many of those people lost all their properties to the banks. This is completely avoidable as long as you buy real estate for CASH FLOW purposes and not for SPECULATION. 

3. Security

Think a retirement account is safer than real estate? Think again.

If you go to Bank of America right now and ask them to let you borrow money to invest in their stock, they will immediately decline. But if you go to them for a real estate loan, they will happily give you one as long as you qualify. This is because stocks are viewed as a great risk than real estate by the bank themselves!

Imagine reaching age 65, finally old enough to retire, and you have all this money stashed in retirement accounts ready for use. One problem, its 2009, a year later after the start of one of the country's largest recessions. In the last two quarters of 2008, Roth IRAs and 401Ks have lost $2.4 trillion dollars. Now your retirement account lost most of its value and now you are barely trying to survive your retirement by having to get a part-time job. Is that really considered safe retiring?

Residential real estate will always be around because people need shelter, it is included in Maslow's Hierarchy of needs. People will always need a place to live and therefore there will always be a demand for rental properties because it is becoming increasingly difficult for the average person to buy real estate due to increasing prices. As long as you do your research correctly, you should expect your properties to generate income each month/year.

Summary

Overall it wouldn't be bad to invest in both things for diversification and extra security. However, if you were to pick one, real estate investing by far is the better wealth generator given the points above. Better cash flow, monthly income at any time, faster growth, and more security is what makes real estate investing a much more attractive way to invest your money.