The American Education Institute

Here’s another idea for improving your credit.  Go to two or more banks and invest in a certificate of deposit (C/D) at each bank.  But first learn the absolute minimum amount for an installment loan each bank will grant to you.  Then buy the C/D for that amount.  If each bank will make a $1,500 loan, then buy a $1,500 C/D at each bank.

Maybe two or three weeks later, return to each bank and ask the loan officers there to make you an installment loan for the same amount you have deposited in their C/D, which you then offer as collateral.  Request that each loan have a term of at least six months.  The idea here is to make sure each loan and your payments are recorded on your credit report.  Generally, you should have no trouble acquiring a loan like this, since your collateral is already a liquid asset and it’s already on deposit with the bank that’s granting the loan.  If you default, bingo!  The bank seizes your $1,500 C/D, and that means your credit risk to the bank is almost non-existent.  You will have to pay interest, however, but it should be minimal.  Usually you can count on the interest being about 2-to-3 percent more than what the bank is paying you on your C/D.  This is the bank’s own margin of profit, but it’s still a fair price to pay for the improved credit rating it’ll earn for you.

If the loan officers ask you what you intend to do with the money they lend you, just be honest.  Tell them specifically you are trying to build credit with their own bank.  Always reassure them that their loan will be repaid on time, or earlier, with the idea that maybe you could later obtain a mortgage with that very bank.  You will most likely get the loan you request.  The bank’s officers are in the business of making money without much risk to the bank, and your proposal is ironclad.  The bank already has the loan paid for in terms of secured collateral, and it’s earning your 2-to-3 percent besides.  It’s how bankers think.  There’s an old saying, “in order to get a loan, you first have to prove you don’t need it.”  This is still quite true in the case of banks.

But the punch line to all this is:  take the money these banks lend you and turn around and deposit it in other savings accounts at other banks!  You can then withdraw some every month, plus the interest it earns there, to make your payments on time to each of the other banks that gave you the loans.  If you’re lucky, you might even earn a small profit in the long run!  But don’t count on it.  Your objective here is not to make money in small change.  Your objective is to build credit in order to be able to make big money in big profits later on.

Dr. Eric T. Martin / 100% Financing When Buying Real Estate / 3-11-09