How do I preserve my credit score while investing in real estate?

[Jason Garrett]

For years I have had a credit score over 800.Now that I am investing in real estate, it is plummeting. I can’t find any articles or advice on how to preserve my credit score while investing. To understand what is happening, here is a brief description:

1997-We (my wife and I) bought a condo in Ponte Vedra Beach, Fl. We were in the military, so when we moved out, we just kept it and rented it out.(Positive Cash Flow)

2007-We were transferred to Hawaii where we bought a beautiful home with a detached Ohana (Mother-in-law suite). We moved away in 2015 and are renting it out.(Outstanding Cash Flow)

2017-We moved to the Pensacola, Fl area and bought our current home.(Credit score over 800)

2018-We committed to increasing our real estate holdings.In February we bought a condo in Pensacola, Fl. We put 20% down and financed the rest with a 30 year mortgage.(Positive Cash Flow) (Credit Score over 800)

2018-In February we refinanced our house in Hawaii.

2018-In March we refinanced our Condo in PV Beach.

2018-In May we bought a SFH in Central Alabama.We bought it with cash…purchase and rehab cost was $42K.It rents for $725/m.(Positive Cash Flow). (Credit Score over 800, but ownership of this property does not seem to be on my credit report)

2018-In June we bought a duplex in Mobile Alabama.We put down 20%, got a commercial loan and it was our first purchase in a newly formed LLC. (Credit Score probably over 800, but I never really checked during this purchase).We are finishing a rehab and are just starting to advertise for rent (Sept 5, 2018)

2018-In July we got a HELOC on our Hawaii House so we can start using it to buy property. We haven't used it yet, except for…see next line.

2018-In July, we rehabbed our Ponte Vedra condo.It’s done now and newly rented for double what we had been renting it for, so now it is providing not just positive cash flow, but outstanding cash flow.  Anyway, we used two credit cards to pay for the rehab. We put about 75% of the limit on each on those cards for about a month. (I’m assuming this is where the Credit Score got into issues).

2018-In the last few days of Aug or first few days of Sept, I paid off one credit card with cash on hand.I then wrote a check from the HELOC to pay off the other. All told, the HELOC has about $11,900 on it. That's less than 10% of the credit line. I then did a credit check on myself as I am getting ready to purchase a new build and found out that the credit companies did their monthly look at the exact moment where I had put the money on the HELOC, but my cash payment hadn't yet come off my credit cards. It looks like I had double the debt that I actually had. Now I have found out much to my horror that my credit score has plummeted in a matter of days from above 800 to between 720-740 between all three credit bureaus.

While I fully understand how credit scores work and what affects them, I’m not sure what you are supposed to do with credit if the use of it is so damaging. How are others using credit without damaging their credit scores? Is anyone else dealing with these issues? Sadly, I’m not seeing any discussions, articles, podcasts, or books on this subject.  It’s a real Catch 22…use your equity and credit to buy property, only to have a credit score damaged to the point that you’ll have trouble buying any more. Anyway, I’d love to hear what you all think or advise.

Jason Garrett