Step 1: Get Your Own House In Order
These baby-steps get you organized and mentally prepared.
Money: 0
Commitment: 0
Time: 1 hour
1. Learn to read
You say: "I have to read?!"
Yes. If you can’t read a web article, you won’t make it through the real estate biz. You will have to push your mental boundaries and do some things you’re not used to. Consider this your lesson in tough-love, Baby!
Ok, you read the first paragraph! Let’s go:
2. Your Credit Report
In this step, we’re going to look at your credit report and get you prepped to qualify for the best real estate deals. Many people overlook this step—and they don’t qualify for the best deals. It may seem odd to do this first, but don’t worry, it’s free, easy, and does not commit you to anything. If you do it now, your score will have plenty of time to rise while you do the rest of the tutorials.
Federal law allows everyone to get a free credit report. There are 3 major ‘Credit Bureaus’ called Experian, TransUnion, and Equifax. You can get 1 report from each Bureau once a year. So for now, just request your report from Experian. Save your other 2 freebies for next time you might need it.
Go to www.annualcreditreport.com. Fill out the forms to download your credit report. It will not give you a “score” just yet, but it will give you several pages of information.
(Take this moment to set up a folder and start organizing all your real estate documents.)
Your free credit report summarizes all your financial accounts. Here's a sample of what to look for. Look through your document and make sure it’s accurate. It may reveal a bunch of old accounts you don’t use anymore (when was the last time you rented a video from Blockbuster??). If you have any old store accounts that you don’t use, call them up and cancel the accounts.
Your credit report also has a table of all your previous payments. If anything is past-due, it will be highlighted. Look at these closely, if the late payment is wrong, call the account and discuss with them why it’s wrong and try to get it re-reported. There is also a button to "Dispute" any erroneous information. Start the Dispute now as it takes a few weeks to resolve.
There will be a section for “negative items”. Don’t freak out over every bullet point, but if you have a lot of bullet points, look into them. Check the section for past-due payments. Look for any mistakes and pay off any delinquent bills immediately.
If you have any accounts that are not listed as “Good Standing”, that means something is wrong. You should call them and try to figure out what the problem is, and get your account back into Good Standing. More resources are here for improving your credit report.
3. Your Score
Your free credit report will not give you a “score.” You have several options to get your credit score. Many credit card companies offer a free score anytime. Log into your credit card accounts to see if they offer this feature, it may be as easy as a few clicks.
www.CreditKarma.com will give you a free estimate of your score.
People often worry that checking your score will lower it. That is only partially true and the drop is only a few points, and doesn’t last very long. That’s why we are checking your credit at this early stage, so any small drop in your score has time to rebound. So do it now!
Your results:
750+ Congratulations you are in good shape. Keep it up and don’t take out any new loans, credit cards, or store-cards in the meantime. Don’t lease a car, don’t do any major financial changes. Make sure you pay off your cards every month and don’t pay anything late, ever! And you’re done with this homework, you don’t even need to keep reading. Congrats!
680 to 750: We can get your score up to the next tier which will give you better options.
Don’t make any new major purchases in the meantime. Do not open any new credit cards or store-card accounts, don’t lease a car, don’t do any major financial changes. Pay off and stop using multiple credit cards, but do not cancel the accounts. Start using only 1 credit card for everything, and pay it off completely at the end of the month. You need to show that you have a lot of “available” but unused credit capacity.
Below 680: You might need more time to bring up your score, but it’s still doable. Don’t get scared. If you are in the habit of missing payments on your bills, you are faced with a non-negotiable lifestyle change before you can proceed with real estate.
Full stop, take a breath.
If you can’t afford all your bills every month, or you just procrastinate and pay late, real-estate may not be the investment opportunity for you unless you are willing to change your behavior. Not only will late fees eat up your profit margin, but you won’t qualify for the best loans if you habitually make late payments. Do some soul-searching and reconsider if you are ready for this. If so, you have to make changes TODAY to get your bills organized.
More on organizing your bills and positioning yourself as a real estate business person in the next article!
