Listen to the Podcast Here: Welcome back to The Real Estate Nerds Podcast! On today’s episode, we’re talking credit in plain English. The first thing that any bank is going to ask someone who’s looking into real estate investing and asking for a loan is, “What’s your credit score?” Your credit score is extremely important because credit is the cornerstone of the entire economy. Everyone knows credit is important, but not everyone realizes how important it is until they need something today. Fortunately, the Real Estate Nerds have got your back. Credit expert Wayne Sanford joins our host, real estate attorney Scott Smith, to share some credit tips that real estate investors–or really anyone–can actually use. Whether you’re new to credit, bouncing back from bad credit, or simply looking to improve your good credit, Wayne has tips for you. In under half an hour, you could be on your way to a better credit score. Let’s get right into it. Description Useful Resources Techniques You Can Use To Improve Your Credit Scott introduces Wayne, and the two experts dive right into common credit dilemmas and solutions. [1:00] Scott asks what types of investors use Wayne’s services, and is surprised that the answer is nearly everyone: “Everyone knows credit is important, but you don’t realize how important until you need something today.” [1:44] His demographics are a combination of those with poor credit in need of credit repair and investors with good credit seeking to make it even better. Many of his clients approach him for the first time when they enter the real estate market. [3:00] Scott asks about the most common situations that have easy fixes. The easiest situation for Wayne to address is “getting a fast 15 points.” Investors can take advantage of revolving credit (i.e. credit cards) being the single biggest factor in a credit score. Minimizing use of the credit card and keeping its balance between 10-20% of the max is superior to a balance of 0. The conventional wisdom that paying off a maxed out card monthly is actually just a popular misconception. [4:45] New credit, or “baby credit,” applies to credit histories under 5 years old. People with new credit want to demonstrate that they’re a good risk for the lender. An average investor can call their credit card company to find out when their company reports to credit bureaus and exploit this information by timing when lenders pull information. Credit isn’t done in real-time; sometimes it’s better to wait for your credit to update before having a lender look you up. [7:00] Wayne points out that the “Fast 15” technique is best for newer credit. Individuals with decades of good credit history may benefit more from keeping a zero balance. [8:30] Young people or those with no credit should approach establishing credit wisely. Our guest points out that there are great credit options for college students with low limits around $500. People in this situation should maintain a low balance, while also making regular and timely payments. Once you make a late payment, it can’t be un-done. [9:00] Scott asks about the best strategies for those in the 650-600 range who are trying to improve their credit for better financing on real estate. Wayne has a few pointers for these investors. [9:40] Wayne offers a useful analogy for understanding credit: “Think of your credit report like a stack of cards. The messier it is, the lower the credit score.” Higher scores are “less messy,” which means it’s easier to repair poor credit but a longer process to elevate someone from 650 into the 700s. [10:44] Most real estate lenders are concerned about the most recent two years. It still takes seven years for damaging credit information to fall off, but good recent trends are the most important for investors. Credit Information Everyone Should Know [11:50] Each state has its own statute of limitations on how long a creditor can sue you for. Some states like Wyoming can hold lenders accountable for 10 years, but this is on the longer side of the spectrum. The effect of judgments from creditors is massive: lenders won’t want to touch lenders in this situation at all. [13:00] Fortunately, Wayne explains that recent changes in the law have helped those plagued with medical debt. Many of Wayne’s clients approach him because of debilitating medical debt: “God knows the medical industry is a business, and their billing department is the worst I’ve seen ever.” [13:10] Even otherwise responsible individuals who pay bills on time can be damaged by simply not receiving their bills. Professionals like Wayne can help if the creditor or collection company made an error in delivering the bill. [15:00] Scott asks what weapons are available for those who get in a credit-related fight. Wayne shares that there are more tools available in disputes than most customers are aware of. Scott acknowledges that areas like credit and the law have professionals for a reason. Yes, you can learn the same information as experts, but it’s generally not the best expense of the average investor’s time: “It makes sense to hire professionals to help us when there’s a steep learning curve.” Scam-Busting with Wayne: How To Tell if a Credit Provider is Legitimate [16:52] Not all credit repair services are created equally. Wayne offers some tips on how investors can find the best professional for them, and stay away from the scammers in the industry. [17:10] Scott asks Wayne how customers can find a good credit professional and weed out the scammers in the field. Wayne advises that we look for professionals who ask questions. Legitimate credit professionals will want to know about your situation to ensure you’re getting what you need. He agrees with Scott’s assessment of when to hire a professional. If you’re inclined to do the work yourself, you can make a bigger mess that you will have to hire a professional to help clean up. [19:20] Wayne also advises that credit customers go with their gut feelings. If something feels off, or you get the sense someone is reading a script just to sell you something, follow your instincts. Looking at customer reviews can also be helpful. [21:00] The expense of a service isn’t necessarily an indicator of good or bad companies, according to Wayne. His own company offers a sliding-scale fee based on the complexity of the customer’s needs. [22:50] When a customer’s need change, there’s another advantage to using a professional like Wayne: “When I’m looking at your credit, I don’t just look at it from the credit score perspective. I also look at it from the underwriting perspective.” [23:00] Wayne explains his process for evaluating his clients. He always looks at credit scores for free, partially out of a belief in karma. But he also knows that being honest about whether someone needs his services can lead to future referrals. The Takeaways: Know Your Credit Score, Use a Professional, and Watch Out for Scams Scott and Wayne end the show with some key points investors can use to get the most out of their credit professionals, and a quick PSA on credit fact vs. fiction. [24:50] Scott reminds listeners of the value of a good professional, and shares his personal approach to getting the most out of experts: “I’m a big believer in paying experts small sums of money to get great information. I find almost all experts are willing to do that…I always advocate that people use and abuse attorneys and CPAs like that.” [26:00] Wayne leaves us with a Public Service announcement: “If it’s over seven years old, it can’t be posted on your credit. Depending on your state, usually 4-5 years after, you can’t be sued. If they’re threatening you, it’s most likely a scam.” Threats are used in these situations, but are generally empty. Connect With Wayne Sanford Connect with Wayne Sanford through his website, WayneTheCreditGuy.com. You can also email Wayne directly. Don’t forget to check out his free information online for more details on how to Get a Fast Fifteen Points. Listener Resources Thank you for joining us on today’s episode of the Real Estate Nerds Podcast. For even more free educational resources on real estate investing and the law, check out the Royal Legal Solutions blog. You can also reach our host Scott Smith directly, connect with him on LinkedIn, subscribe to the Royal Legal Solutions YouTube channel, or join our investor community on Facebook. Don’t forget to subscribe to stay up to date and have the most current episodes of the Real Estate Nerds Podcast directly in your listening library. Every subscription helps us create new, custom content for you. What did you think of today’s episode? What would you like to hear more about in the future? Leave your thoughts and questions in the comments section below, or leave us a review in the iTunes store. We love hearing your feedback, so fire away. Join us again next week for a fascinating conversation about a deal gone wrong with Marco Santarelli. Thanks for listening and joining us on our journey to become better investors! Hosted by Scott Smith, Lead Attorney and Founder of Royal Legal Solutions. Schedule your personal consultation now. If you have questions about our content or suggestions for future episodes or guests, reach our podcast team at [email protected].