What is the RIGHT strategy for securing a large line of credit?
Some of my colleagues have been very straight forward in how using credit to fund your business ideas can be a great way to go. The over-arching thought is that when you borrow you take on more debt. This is very true! There really isn’t much that can be had by most people without incurring some kind of debt or borrowing money from a lender. This includes most major big ticket items such as homes and automobiles, and even borrowing for your college education, or the education of your child if you have children.
Let me be very clear, incurring debt and using credit should not be a long-term strategy by any means when it comes to funding something that you want to do. It is simply an alternative, albeit a less likely alternative for most, but an alternative no less. Borrow what you can afford to pay back and at the level of risk where you are comfortable.
So, in today’s blog post I want to touch briefly on a strategy that helps position your credit file to be approved for large lines of credit.
When it comes to borrowing you have options. Business owners have been using lines of credit to meet capital requirements, or take advantage of strategic investment opportunities, but they’ve never quite caught on as much with individuals. Some of this may be due to the fact that banks don’t often advertise lines of credit, and potential borrowers never think to ask. Here, then, are some of the basics about lines of credit.
A line of credit is an open and adjustable loan from a bank or lending institution to an individual or business. Not unlike how a credit card offers you a limited amount of funds that you can use how you wish, a line of credit however is a specified amount of money that an individual can access as needed and then repay it immediately or over a pre-specified period of time. As a loan, a line of credit will charge interest when the money is borrowed, and of course, all of this is contingent upon your gaining an approval on your credit.
A line of credit addresses the concern that banks are typically not interested in underwriting one-time personal loans, particularly unsecured loans, for most customers. Likewise, it is not economical for a borrower to take out a loan every month or two, repay it, and then continue the cycle. Lines of credit answer both of these issues by making a specified amount of money available if and when the borrower needs it. You can open the line, and then repay it as necessary. If you’ve got enough revenue being generated through your business this can be a great idea because you can continue to cycle money into the line of credit, which looks good to the bank.
So, what about your credit?
In order to gain an approval, your credit needs to be on point! Or in other words, your score and your credit file need to be prepped so that you stand a good chance of gaining an approval. You need to do this ahead of time so you will need to plan accordingly. The primary way to do this is to purchase tradelines.
Experian defines a tradeline as an “Entry by a credit grantor to a customer’s credit history continued by a credit reporting agency. A trade line defines the consumer’s account status and activity. Tradeline info comprises names of businesses where the applicant has financial records, dates accounts were opened, credit limits, types of accounts, balances owed and payment histories.”
So in other words, you can have other credit accounts added to your credit that do not belong to you but have a very strong history and balance. What this does is it props up your credit file from an available balance standpoint as well as from a point perspective. The better the tradelines, the higher the score, the more favorable your credit will look to a lender and the better the chance you stand to borrow money.
If you are looking to purchase tradelines you can send me an email at dean@deancantave.com with the subject line: Tradelines
Problem: You need to “prop up” your credit so a lender will approve you for a line of credit.
Solution: I would first recommend a credit restoration program, such as the one my company offers, before adding any tradelines. Once you have been able to reduce derogatory items, collections, bankruptcies, excessive inquiries, etc., I would then add as many tradelines as necessary to aid with increasing the credit score. Keep in mind this is not permanent. You purchase tradelines as a temporary fix to gaining approvals so these will not stay on your credit for a long time.
