Fair Isaac, the company that develops the formula to determine credit scores looks at the average statistics of consumers and factors that into your score, called a (FICO). According to Fair Isaac the average consumer will have:
One inquiry on their personal credit report in a given year
54% of credit holders carry a balance of less then $5,000 on all debts other then a mortgage
Have access to $12,190 on all credit cards combined
“Now are entrepreneurs, like you, the typical consumer?” I asked one of my clients (J.G.). “No.”, said J.G.. “You will see that as an entrepreneur, we have several more credit needs then the average consumer. So when the personal credit bureaus compare us to the average consumer, our credit consumption is not normal. Which is why your credit score lowered since starting your business.” “That’s not fair” said J.G. My reply, “If you don’t understand how the system works, you’re right.”
Let’s look at J.G.’s situation. He has applied several times with suppliers for various credit lines over the last year. Each inquiry will likely drop his credit score approximately 5-10 points. The credit bureaus as suppose to lump three together and only drop 5-10 for the three, we’ll see if it happens. He also has a $60,000 line of credit available and carries a balance of $42,000. Both the amount of credit and balance are more then the consumer average which can hurt his score as well. This is without looking at anything else in the business or his personal life.
If J.G. had just taken the time to develop a business credit profile and start establishing basic lines of credit in the business name and then slowly build the businesses credit over time, he may never have ended up without the ability to buy the home he and his family wanted.
This is why I have written books and developed products and services with our company, Business Credit Services, to provide an education to the entrepreneur on how to “become the typical consumer again” and “separate your personal and business life”.
If you operate a mobile business and worry about taking credit card payments the old fashioned way, rest assured that a mobile merchant account can provide you with up-to-date technology that will give you the lowest retail rate and instant card feedback while in the field. You won’t have to worry that you might not learn that a customer’s credit card is rejected when you return to the office. Nor will you have to leave a statement and hope the customer remembers to send in a payment. Now you can apply for a mobile merchant account that will provide you with up-to-date wireless equipment that can provide confidence and security while you are processing payments on the road.
When you are ready to apply for a mobile merchant account, you will be happy to know that many companies can give you an answer the same day. As long as your company has a decent credit history and is able to pay monthly fees for account services, you should have no problem in getting approved for a merchant account. If you conduct business while on the road, for example, by delivering floral arrangements, making service calls, or providing transportation, you can collect credit card payments at the point of sale rather than waiting to send a bill or hoping the customer will have the correct amount of cash or pay with a check that won’t bounce. If you plan to attend a trade show, a conference, a convention, or a seminar where you will be selling products, you can take along a wireless credit card processor to make sure you get paid the same day. Wireless units come with or without printers. They will let you get the lower retail swiped rate, along with immediate authorization and sales confirmation, instead of paying the keyed-in rate if you call the credit card number into the office for processing.
Your mobile merchant account will help you save money and time. You can handle the credit card processing yourself instead of hiring accounting staff to send out bills and call for collections when checks bounce from the back. You can even get additional mobile equipment to support your business transactions while in transit, like a pager or an e-check processor. Most units are small and easy to transport in a vehicle of just about any size. They fit neatly on a table for indoor business purposes, too. No special training is required for operating them. Just read the instructions or talk to the account associate to learn how you can start accepting credit card payments quickly and easily.
The rates for utilizing a merchant account are not prohibitive. Plan to discuss the fees with your lender to be sure you understand the pricing for each type of service. Your credit card processor may be billed at so much per transaction, or you might be able to request a monthly percentage rate. Find out why so many business owners are using credit card processing equipment that can be obtained with the help of a mobile merchant account.
Credit problems plague people across the globe. These problems can lead to many other problems not limited to difficulty purchasing vehicles, getting jobs, opening checking accounts, and purchasing or renting a home. For those who are experiencing credit problems hope seems like a long lost commodity when it comes to the very American dream of owning a home of one’s own.
The good news is that there are some savvy investors around that are willing to take the risk on those who have had credit problems but are attempting to get their lives back in order. The bad news is that this good will often comes at a rather high price to the consumers. Getting into trouble with credit takes a while from which to recover. For many the process is long and filled with pitfalls and missteps along the way. For those that are living the nightmare of poor credit there are times in which the situation must seem hopeless.
For this reason investors that offer lease to own real estate to those with less than spectacular credit are often viewed as saviors on the one hand and villains on the other. However, they are taking a risk that others are unwilling to take on a person that has proven not to be the best credit risk in the business. In other words, many would find that they are justified by charging a higher price or interest rate than traditional lending institutions will charge. After all, it is their money that is on the line if the lessee decides to default on the contract. It is also their money that will be required to make any repairs that will be needed if eviction becomes a necessary conclusion.
For investors who are interested in ‘buy and hold’ investing this is one way of making that system work in their favor. Many times the ‘buyers’ will find another property after a couple of years and will have essentially rented the property for a specified amount of time. At other times they will seek alternative financing once they have been able to straighten out their credit situations. Either way there are many occasions when the property is returned to the investor and has turned a relatively decent profit while holding those who took some degree of ‘pride of ownership’ in the property during that time rather than ordinary renters who often have little or no regard for the condition of the landlord’s property.
There is more than one way that a lease to own deal can work. The most common however, is that there is a specified amount of time typically 2-5 years in which those that are leasing the property can live in the property with a portion of the monthly lease being applied towards a down payment for the property once they are able to get traditional financing. If a twenty percent down payment is achieved during that time the odds of them being approved for a loan are greatly improved. If they (being the lessees) combine this opportunity with serious efforts to improve their credit scores then there should be no problem achieving this.
As a real estate investor this situation is so much more attractive than renters for many reasons. First of all, the maintenance in these cases becomes the problem of the lessees rather than your problem, you have ‘renters’ that are hoping to have ownership of the property in time, and you can charge a little more each month for rent in order to cover the money being applied to the down payment on the property.
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