In today’s world, our economy runs almost entirely on credit. Having a good credit score makes it much easier for a person when it comes to dealing with banks and taking loans and mortgages. This is especially important for businessmen and investors as they have to deal with banks on multiple occasions on a regular basis. Building a solid credit history and maintaining a high credit score may have a significant impact on your quality of life and your future investments. Here in this article we will discuss 3 reasons why maintaining a healthy credit status is important, especially when it comes to building your property portfolio.
1. Better mortgage and loan options
When you apply for mortgage on a property or take any type of loan, the bank will always refer to your credit status first. The bank uses your credit score and history to determine how trustworthy you are financially, whether you are financially stable and whether you will be able to pay back your debt in a timely manner. Once they have determined this they will offer you a choice mortgage and loan options and rates, a good credit status means that the bank you offer you better options as well as lower rates.
2. Ability to diversify your investment
As stated in the previous option, when your credit status is good you have more options to choose from. This does not apply only to the banks but outside them as well. A good credit status means that you have the flexibility to diversify your investments and increase your returns.
To give you better idea let us take the example of equity. Equity is the difference between your properties current value and the remaining mortgage balance. So if the value of the property has increased and the mortgage balance is low you will have a good amount of equity which may be used to invest in another property. This in turn will make available multiple options to help build your portfolio as well.
3. Yielding extraordinary returns in times of crisis
During an economic downturn as in the last global financial crisis, equity and property prices could be heading south as markets react in panic. Such an event offers massive opportunities to investors with a strong credit rating as during these times “Cash Is King” and investors with a strong credit score are deemed as fundamentally strong by a financial institution. They would be offered additional credit lines by the banks to fund their bargain hunting. Hence the saying that the rich will get richer is true.
As a property investor you have every right to make the most out of your investment ventures. Don’t let obstacles like a bad credit report or a bad credit score get in your way. Keep your credit status high and the rest will fall into place.
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