What to do...when my credit is low 500s

Question

I am working on raising my credit. It is 540.

I am a truck driver and will be debt free at the end of the year.

In the mean time I am close to having $5,000 put aside that I would like to have working for me.

Can I get started somehow, some way doing something with this?

Bob Woelfel · Answer

@Ed Engstrom while I'm sure there are some on this site that would say go ahead and get started, I would highly suggest you get debt free, save more money and improve your score. Your credit score is exactly what it says it is, a scoreboard of your financial past. While your score certainly doesn't say anything about the kind of person you are in the grand scheme of things, it does say a lot to a bank or any other lender about the safety and security of their money. There are any number of things that could have happened to you or reasons why your score is where it is. All those things are now in the past and it's up to you to move forward from here. It sounds like you are taking positive steps to do so. Once you start making payments on time and become debt free you score should start to improve significantly over a short period of time. I've always viewed real estate investing like a business. One key to being a successful business person is to manage money. A persons ability to mange their own money before starting a business is a pretty good indication of how they will manage their businesses money. You must get better at this.

Take this time to educate yourself about money, investments and personal development. Read books or better yet for you listen to podcasts while you are driving. Learn what type of investor you want to be based on your career and what your overall goals are. Best of luck.

Take this time to educate yourself about money, investments and personal development.  Read books or better yet for you listen to podcasts while you are driving.  Learn what type of investor you want to be based on your career and what your overall goals are.  Best of luck.

Bob Woelfel · Answer

@Ed Engstrom Bigger Pockets has a great podcast if you didn't know, but that's more about the nuts and bolts of RE investing.

Here are 3 books that changed my life in various ways...you can probably download all of them on your phone.

Pay It Down - Debt Free on $10 a day - by Jean Chatzky

I was 25 living in Chicago and I was a financial idiot.  I had maxed out all my credit cards and basically had no money until my next paycheck.  I didn't even want to buy this book because it was going to cost me $15-$20, but I knew something had to change.  It's a very basic way of finding $10 a day in your current life so you can use that to pay down your debt and start saving.  Within 2 years of reading this book I had purchased my first house.

The Compound Effect - by Darren Hardy

This is a great book...easy read.  Basically the premise is how to make very small changes in your life that most people will barely notice, but over time those small changes will compound and end up being massive.  It's great for all aspects of your life...money, health, relationships, happiness, etc.

Rich Dad Poor Dad - by Robert Kiyosaki

Hang around BP or the podcast long enough and you'll hear plenty about this.  He breaks down the differences between employees, self employed, business owners and investors.  It completely changed my perspective on life and I felt stupid for not realizing many of these things earlier.  If you ever want to get into RE investing I highly suggest reading this.

Others to consider reading or listening to...

The Millionaire Next Door

The E-Myth Revisited...I actually didn't think I would like this book, but it was awesome.

I wish you the best of luck.

Ed Engstrom · Answer

Bob,

I know you're a busy man and I am sincerely grateful for the time and advice.

I am going to check these books out (already read Rich Dad) asap.

Congrats on your success and thank you for paying it forward.

Scott Anderson · Answer

I think rich dad poor dad, millionaire next door and richest man in Babylon are three books to hit up first. They will lay the groundwork for better financial control. Then branch out from there.

Joe Splitrock · Answer

@Ed Engstrom welcome to BiggerPockets. If you are interested in getting into buy and hold rental properties, then leverage is your best bet. Leverage meaning, taking out loans so a small down payment buys a larger property. To qualify for the loans, you will need to improve the credit score. Paying off debt is great, but building credit requires on-time payment history and some use of credit. Without knowing what is holding your score down, it is hard to advise on how to fix it. Using credit responsibility is generally the best way to build your score - for example putting purchases on a credit card and paying off every month.

For now I would focus on rebuilding your credit and getting educated. Save money until you are in a better place. Honestly, the $5000 should be kept as an emergency fund, so I wouldn't even use that to invest.

Krissy Key · Answer

@Ed Engstrom I just want to encourage you to stay the course. Getting (consumer) debt free will put you in a better position to grow and invest. You don’t need a perfect credit score, but a low one (in the 600s) makes it harder and more expensive to get a mortgage.

Ed Engstrom · Answer

Thanks for all the replies and suggestions... I really appreciate then all.

Ed Engstrom · Answer

@Bob Woelfel

I ordered The Compound Effect on Kindle.

Great book so far. Thanks for the suggestion.

Bob Woelfel · Answer

@Ed Engstrom...glad to help.  Good luck.

What to do...when my credit is low 500s

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