$150 000 (cash) No Credit Score: Best Strategy

[Michael Steyn]

G'Day BiggerPockets,

I will be immigrating to the States in July and currently contemplating what the best investment strategy would be for someone in my situation. I would not have a credit score when I first arrive, but have set aside a cash amount (150 000) to get the ball rolling as they say. What do you guys think about paying cash and pulling out 70-80 % by refinancing 6-months later with the intention of duplicating the strategy...?

My investment aim is to buy and hold for the long-term. Any thoughts? Would appreciate any thoughts or comments.

[Matt Y.]

I think an aspect of your strategy would be to establish credit.

Credit is primary built by using credit cards.  I would suggest opening 3 of them to start.  If you can't get approved normally, I would take $15,000 and open three secured credit cards with $5,000 each.  Use and pay off these cards in full each month.  You'll shortly establish a credit score.  Within a few months you should be able to open some unsecured credit cards.  With the $5000 limits you'll likely get approved for limits of at least that on the unsecured lines.

The long term goal should be 5 credit cards with 3+ year history on each.  If you plan to close the secured cards at some point (1-2 years down the road) you'll need to be more aggressive in obtaining unsecured credit.

My warning is to avoid limits much less than $5000. Credit limits are based a lot on income and your ability to repay the debt.  Larger limits imply you have more income.  These higher limits don't necessarily increase your credit score but do significantly increase your chance of approvals when banks are underwriting.

It may be worth it to speak to someone that is an expert in this area.  It's an area filled with sharks and people that really don't know the industry though so be careful.  Most bankers are clueless in establishing or rebuilding credit.  The secured credit card approach ties up some cash but is straight forward and simple.