How to Establish Enough Credit to Get a Loan from Your Bank

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learning to establish creditI learned this from my dad, who was having a hard time opening up a business. He often complained that the bank kept telling him that he did not have enough credit with them. Everyone knows that to get a loan from a bank you have to have credit established somewhere or have something that you are willing to put down as collateral.

In my dad’s case, he had neither enough credit or collateral. His business was going to cost him a pretty penny and he wanted to open his business within a year. He was eager to get it off the ground so that he could start profiting from it. He was tired of working for someone else, and wanted to be his own boss for once.

His strategy was easy! He would give the appearance that he had more money that what he had. At the time he was raking in about $1500 a month after taxes. This was back in the early 90’s and therefore it was considered above average, and yet he was still not making enough to get the loan that he needed. He needed to show the bank that he made good money decisions and that it was not costing him much to live on.

His plan came to him one day, after talking to the bank teller. The bank teller told him that he needed to be able to prove to them that he did not have very many expenses and therefore, it would show that he would be able to pay the bank off when the loan note was due.

He started depositing his checks, instead of cashing them. He hates to write checks, he says that it makes it harder for you to keep track of the money, he prefers using his banks debit card. In this case, he had to start writing checks. This gave off the appearance that his bank account had a higher amount than what it actually did. When doing this, it makes the bank think that you have more money and therefore less expenses, when you actually have the same amount of money and the same quantity of expenses.

When he would deposit his checks, he would go inside of the bank and do this so that he would get the chance to know the managers of the bank. If you get to know them and they began to trust you then they are more willing to loan you money.

Six months had past and he went in the bank and tried to apply for the loan that he needed. He was denied that amount because they said that he did not have enough credit, but the bank teller told him that he could start building his credit by taking out a small loan and repaying it and then he could take out another one and repay that one. This will help to establish his credit.

He took the advice of the bank teller and took out his first loan. He paid the loan off in four months and then went and applied for another one. When he paid off the second loan, he paid a little more than what the monthly amount was so that it would build his credit up even faster and help him to pay off his loan at the same time.

It took him almost a year to pay off the second loan. He was not out of hardly any money because he kept most of the money and put it in the bank, which caused it to look like he had even more money in his account, he would then take out the monthly payment and pay them.

He did not make his goal of taking out a large loan within a year but he was able to do this a year and a half later. He established his credit high enough to take out the loan. Once he took out the loan, he went and purchased the company that he wanted and then began to pay the loan off.

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