How can I repair damaged credit, so I can finance real estate investments again?
At some point in their life, everyone has hard times. Sometimes
it’s a divorce, death of a loved one, an unexpected layoff, or
ignorantly neglecting your finances. The bills spin out of control and
you find yourself with a damaged credit history and no one willing to
let you borrow a dime.
Fortunately, it’s a situation you
can fix. Follow these steps to put your credit and finances back in
order, so you can start buying real estate investments again:
1) Dispute or Reconcile Past Accounts
Collection
agencies are so backed up that you can frequently outmaneuver them and
force them to remove negative items from your credit. Take the
following steps:
- Dispute the negative items with the three Credit Reporting Agencies
- Request validation from the Collection Agency
- If they fail to validate, have the Credit Reporting Agency remove the item from your credit
- If they successfully validate, negotiate a settlement in exchange for them removing the item
- For any items already paid (such as late mortgage payments), send in a goodwill letter asking for removal of the item
2) Practice Sound Money Management
With effort and a
little time, you can erase your negative credit history, but it does
you no good if you continue past habits. You need to develop new habits
that will put you in a constant state of readiness, in case you find a great real estate investment and you need to move fast. Consider the following tips:
- Prepare a Profit and Loss statement for your personal life and business, so you know how much money is coming in and out
- Hire a bookkeeper to organize your finances and prepare a polished Financial Statement
- Setup Online Bill Pay through your bank to help make sure bills are paid on time
- Pay down your credit cards and other debts (like your car) to increase your credit score
Note: Sometimes, a poor credit score is the result of insufficient credit history. If you need to build your credit from scratch, read the following post:
What’s the best way to build my credit from scratch, so I can start
investing in real estate?