$0 terrible credit to my first property in 6 months

6 months ago I was broke, but rich in determination and most importantly I wasn't poor. 

When I was younger I ruined a lot of my credit and over the years did what I could to manage it however missed some college loan payments and my score fluctuated from 580-600.

I decided the beginning of last year I would make a conscience effort to get on the right path and I thought I had a plan; which looking back on was shit. Let me tell you my shit plan, then tell you how I corrected it.

Start of 2016 - obtained brokers license

My shit plan involved me not paying my $150 student loan to "save" money. This way I would be able to show money in my bank account, and pay off my credit card debt, as well as my car loan to improve my debt to income situation. However, a lender does not understand this theory of money saving..likely because it does not make sense. After I went to a lender had them pull my demolished credit score of 610 I was never called back for reasons I now understand after explaining my situation to the loan officer. 

My situation was not all doom and gloom as I have had 2 different steady paying jobs in the last 6 years. I was able to get my car paid down and had about $2,500 in credit card debt when I decided I was going to start taking the path to purchase an investment more seriously. Which is what I did, in effort to simplify this post I will post my before financial situation brief description what I did to get out of it, and current situation. 

October 2016 financial situation was as follows

50k a year job

$16,000 student loan debt

$4,000 left on car note (car value $7,500)

$2,500 Credit Card debt

Bank Account $500

Luckily I work for a good enough company where I have been for 2 years and they have a 401k match of 100% of my contribution up to 6% which I took advantage of.

I was able to gain about 9k in leverage through this and took out a loan of $3,000 in December and paid off the credit card debts well as a lump of the car note down. I started paying my student loan timely in the previous 6-8 months, and was able to sell my car in February pay off the loan, credit card, and find myself level and caught up on my student loans.  My financial situation by March was as follows. After selling my car for $7,500 I paid off the note and purchased a 1996 Camry, my cc debt was eliminated by the loan on my 401k that will not show on my credit report, and my student loan was down to $14,000. 

Side note - In my opinion it is much better to loan out on your 401k than to withdrawal, there are no penalties on a loan and the repayment goes back into your fund. In my situation it was somewhat favorable as I took the low when our stock price was high, and was paying back the loan while our stock price was below when it was at the time of the loan. So essentially I made money twice off of the borrowed money without penalty. Everything I have read has said doing anything with your 401k should be your last resort, however I am trying to set up other retirement investments with this money so I believe it is being used for the right purpose. 

What is money if not leveraged? 

March Financial situation

Student loan debt - $14,000

$0 Car note

$0 Credit Card

Bank Account $3,700

I went and got my brokers license at the beginning of last year and have held it since, I got it mainly for myself and did not write any contracts until my own after finding the property I wanted. A $55,000 duplex that needed rehabilitation I believe will be worth $90-$100k after rehab. I now have written 3 contracts including my own home and helped friends and family do make a little bit of extra income. You can read about my buying process in the previous blog post. 

I now have another car loan as I did not want to drive anything used for longer than 6 months as that was my plan all along, however I did what I needed to do to get the approval for a mortgage I know I can handle. My total payments are going to be $370, I will be able to rent the upstairs unit out for roughly $650, I plan to live in the lower unit for 6 months to a year and and will be able to rent the lower unit out for $750, the basement also has its own entrance to a room that can be made into a single living area I plan to airbnb out for $30/night. 

I wanted to write this post to let anyone new know its doable, and in somewhat of a short time period. I was able to get my credit score from a 580 to 670 within a year, get approved for a mortgage at a competitive rate and am on my way to being able to leverage my first property within the next 6 months.