I just started my Company for RE investing (NY) about 7 months ago. I personally don’t have a credit rating because I’ve yet to apply for one. Would it still be possible to obtain a small line of credit? Also what are the normal rates of interest with these lines? Thanks
Tonyman,
There are a lot things you can do to establish credit: Department store cards, secured & unsecured cash lines, first time auto loans, even merchandise cards can help if done right.
You should also be building a credit profile (other things lenders look at to determine your credit worthines and get you on the right “Lists” like job history, moving history, physical address, land line telephone, even certain types of magazine supscriptions can help you get on the “A” list).
Keep in mind that you should not go out and apply for everything you see - only apply for credit that you’re 96% sure you can get and meets your credit building plan target(s). The reason being that every “Hard Inquiry” on your credit report will significantly reduce your FICO score (typ. 5 to 20-pts for every inquiry over 2/yr). A “Hard Inquiry” is when you apply for a credit line of some sort and the creditor pulls your credit report from one or more credit bureaus.
The initial interest rates on personal credit lines are typically a little high but you gotta expect that because the creditor is taking a bigger risk when you have no credit history. One thing that is very important when dealing with revolving lines of credit is to keep your Debt to Credit ratio between 10% and 30 or 35%!
The “Debt to Credit Ratio” is simply the total revolving credit debt to the total credit limit of your accounts (i.e., if you have a $1000 credit limit, only use $100 to $350 of it). This will show that you can properly manage it. Don’t down pay the accounts to Zero - a zero balance with no activity won’t help your FICO score as much as an active account operating in the 10 to 35 zone.
There are many posts on this site that have good information on credit repair and building like(http://www.reiclub.com/forums/index.php/topic,31161.0.html). There are also many books on the subject (one is The Credit Secretes Bible). Unfortuately the REIClub doesn’t feel it is necessary to start a new “Credit” Forum.
If I were you I would make a list of your personal AND business credit goals in terms of cash lines needed, cards, auto loans, leases, etc. Then compare the cost (interest rates) of those credit lines based on various FICO scores, set goals, and make a reasonable/obtainable plan to meet those goals. Done right, it is not unreasonable to obtain very good FICO score within 6-months and great FICO score in a year. Ideally, you want to be in the mid 700s or greater (FICO range is 450 to 850).
Also, you should be developing your business credit profile separately from your personal credit. Again, this requires that you follow a very specific method/plan that enables you to establish trade AND cash lines of credit that do NOT require Personal Guarantees. If every time you have a business credit purchase that requires a Personal Guarantee and they pull your personal credit report, your personal FICO score will go to H@^^ in a hand basket pretty quick. The business should have its’ own credit capabilities and it takes procedural method to get it.
Be aware that all creditors do NOT report to the credit bureaus. So when selecting a credit card or credit line make sure FIRST that they report (bad AND good) at least one or all three credit bureaus or your just wasting your time.
Best of luck!
Gary