For recent college graduates, it can be more of a challenge to get the funding to invest in your first real estate property. You may not have two years of W-2 income to show financial stability, or you may not have a sufficiently robust credit history to demonstrate fiscal responsibility. Whether you’re a recent college grad or a seasoned working professional, your credit report always plays an integral role in the success of your real estate investment future. Conventional lenders will always want to see a strong credit score and history, and you can’t take advantage of any of it without building and maintaining good credit.
How to Build Good Credit
If you’re a recent college graduate, you’re lucky. You haven’t had much time to irreparably mess up your credit. For most grads, it’s a matter of building credit history and then maintaining good status. To build credit, consider taking out a credit card in your own name instead of just being an authorized user on your parents’ credit card. Being an authorized user can help restore bad credit, but it doesn’t do much to build your own credit history
Another way to build credit is to get a car loan. Although the optimal situation is not to have a car payment at all, if you have zero credit history, a car loan can help get you on the map. Avoid the temptation to get the most expensive car that you’re approved for. You’re probably looking at five years of payments. That $400 monthly payment (or whatever it is) will really cut into your available investment money over time. A modest car loan, with monthly payments made on time, will help your credit just as much as a hefty car loan.
If you’ve been paying monthly rent while at college, you can use that history to help build your credit. There are third party companies you can pay for that will report your timely rent payments to the three credit reporting agencies. Assuming all your rent payments have been on time, this can boost your credit rating and enhance your credit report.
Make credit card payments on time or early if possible. Beware of bill pay services offered by your bank. These are convenient, but the payments take longer to arrive and they could inadvertently make your payment late even though you authorized the payment several days in advance. If you enroll in paperless billing, make sure to designate your credit card company as a safe sender, and don’t ignore emails from them.
How to Protect Your Good Credit
If you already have decent credit, take steps to protect it. Continue making all payments on time. Once a year, obtain a free copy of your credit report from the three major credit agencies. Go through and make sure all the information is accurate. If you find something that’s not right, follow the credit agency’s guidelines for reporting errors. They’ll correct any errors, but you should still follow up to make sure it’s been taken care of.
Consider enrolling in a credit protection plan that helps prevent identity theft. The better your credit is, the more likely that a hacker could try to take out loans with your information. You should consider either paying for a monitoring service or make sure you monitor your credit activity yourself.
Learn How to Budget and Manage Finances
It’s reasonable to assume that unless you were a finance major, your knowledge about handling money is pretty sparse. If you’re really going to be investing in real estate you’ll need to learn how to budget money, how to manage finances and more. Don’t leave anything to chance when it comes to your money. Take the time to really educate yourself about budgeting and financing especially when it comes to real estate investing. There are a lot of moving parts, and you have to get a handle on everything in order to be successful.
Some ways to learn what you need to know are to read books, take online courses, attend networking events and think about getting a mentor. Even though you’ve recently graduated, your education concerning real estate investing is just beginning. There’s a lot to know, and it’s up to you to get the answers you need.