The Balancing Act

Last night I read this blog, as I do daily. I read it from December up until the most recent and I noticed something. Ever since this year started, I’ve been putting a ton of cusses on this blog. I understand that the process of buying a property is stressful and I’m perfectly okay with cussing in my day-to-day life. But the purpose of this blog is mostly to examine my business behavior patterns so that I can become better at this game of real estate, and the cussing is distracting—I don’t know why I didn’t notice this before. So I’ll spend the next couple of days going through old posts for this year and getting rid of the distracting cusses, and I’ll save my cusses for my yearly rant (which shouldn't be too far away).

You know, I’m not a very bright person. I learn information, apply the information into business life just once, and then forget about it when I need that information again. So I end up having to relearn the same lessons over and over again. Thanks to this blog, I’ve been able to curb my idiocy in that department. But on Monday, I realized that I had messed up.

When I was with Lexington Law Firm, they schooled me on everything a normal mammal needs to know about building credit. One of the biggest lessons I learned was that credit bureaus will raise credit based on evidence that an individual can manage his/her debt. So I’ve had two secured credit cards from Empower. One has a limit of $400 and is hooked up to my cell phone bill ($49.37 with Straight Talk). The other card has a limit of $300 and is hooked up to my business VOIP phone number ($15.92 with Segway Communications). Every month, I get the bill and pay off the balance before the deadline (22nd of every month) and I thought I was doing well. Then I remembered something else that Lexington Law Firm taught me: All credit card balances should be at 30% or less at the end of each month. That shows the bureaus that an individual knows how to manage debt. It doesn’t take skill to pay off a cheap balance every month and the bureaus know this. So, for about a year and a half I’ve wasted quite a bit of time with my secured credit cards, which is probably why my credit score has been hovering at 637. Let me put it another way:

By paying off the full balance, my balance at the beginning of the month is zero, right? Then the bills come and I pay them off completely. So, at the end of the month, it’s still zero. In the eyes of the credit bureaus, all they see is that I have two credit cards that aren’t being used because they’re always at zero when they check it at the beginning of each month! I haven’t demonstrated any debt management skills and therefore my credit doesn’t go up as much as it would if I had a balance. Idiot! To rectify this, I’ve had to make changes to the way I pay my credit cards. Credit Card #1 (CC #1) has a limit of $400, so the maximum balance for that card should be $120 at the end of each month. So I’ll pay the minimum balance of CC #1 each month, which is $10 monthly. Once it hits $100-$115, I’ll start paying the regular bill of $49.37, giving me a regular balance of just under $120. The same will go for Credit Card #2 (CC #2) which has a max limit of $300 and should therefore have a ending monthly balance owed of $90. I’ll pay the minimum balance of $10 every month until the total balance is near $90, and then pay the full bill of $15.92 to maintain that $90 balance.

I’ll give myself a pass on this one. If I had written it out then like I’m doing now, I probably would have learned this lesson a long time ago. But now I know, so my credit score should go up with the combination of the new balances and the payoff of the Dell debt last month. So whether I get PPC #3 through owner financing or not I can at least be assured that, by the end of the year, my credit score will be good enough to have options. I don’t mind making mistakes because I learn from them. The key is to keep the lessons close to me so that I can apply it fully. This post should help me do that.