Knowing how to build business credit could be the difference between starting your dream business or waiting on the sidelines. And while most people think that building business credit requires years of income, million-dollar revenue, or a personal connection with your local bank, Jack McColl is here to tell you otherwise. Jack has been able to unlock half a million dollars in business credit in record time through a simple system. He did this using means that EVERYONE has access to and is here today to teach you how to do the same.
Jack is a credit master, knowing the ins and outs of every credit score rating, travel credit card, business credit card, line of credit, and everything in between. He teaches some basic techniques in today’s show about how you can get your personal credit score to 700+ quickly and then use that to grow your business credit profile, allowing you to access 0% interest credit cards that can jumpstart your business when you’re low on cash. And even if you aren’t planning on building a business anytime soon, Jack’s tips will help you get a better credit card, a lower mortgage rate, and easier access to lines of credit.
Jack also touches on the exact steps you need to follow to reach an 850 credit score and why the “no credit, no debt” line of thinking will hurt you later in life. He shares the best banks to get business credit from, which cards will help your score the most, and why you should always open a checking account BEFORE asking for a business line of credit. If you want to boost your score, build a business, or just travel for free using points, stick around for this episode.
Mindy:
Welcome to the BiggerPockets Money podcast where we speak with Jack McColl and talk about credit.
Jack:
So really, what I highly advocate and I think is so incredible, which is pretty much a newer product to the world is 0% interest business credit cards, which is 0% for the introductory period of 9 to 18 months. After that period, it goes up to the normal 15 to 20% credit card interest, but you have that introductory where you’re not paying interest.
Mindy:
Hello. Hello, hello. My name is Mindy Jensen and with me as always is my business superstar co-host Scott Trench.
Scott:
Always excited to FICO the next thing out with you, Mindy.
Mindy:
It’s definitely to my Vantage, Scott. Look at that.
Scott:
Oh, that was way better.
Mindy:
Scott and I are here to make financial independence less scary, less [inaudible 00:00:53] just for somebody else, to introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you are starting.
Scott:
That’s right. Whether you want to retire early and travel the world, going to make big time investments in assets like real estate, or fund your very own or first business with a credit card, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards your dreams.
Mindy:
Scott, today we’re talking to Jack McCall. He has an interesting way of generating business credit and he’s going to teach us all about that, but before we bring him in, we are going to talk about our new segment, the Money Moment. This is where we share a money hack, tip or trick with you to help you on your financial journey. Today’s Money Moment, one credit card hack we recommend is to have a credit card dedicated to recurring expenses only. This is a good way to keep track of the overall recurring spend as well as make decisions on what to cut. Do you really need Hulu and Disney+? In addition, it’ll be easy to spot any errors or overcharges.
Do you have a money saving tip for us? Email us at [email protected] Okay, before we bring in Jack, let’s take a quick break and we are back. Jack McColl is the founder of Credit Stacking and scaled from $0 in business credit to $500,000 in available business credit in just over one year, which he has used to fund a variety of new businesses and investments, and now he teaches other people how to do this too. Jack, welcome to the BiggerPockets Money Podcast. I’m so excited to talk to you today.
Jack:
Awesome. Mindy and Scott, it’s so incredibly great to be here. I’m really excited. Thank you for everyone listening. My job on this podcast is to provide all the listeners with as much tangible value as I physically can on this podcast, so thanks for being here and thank you guys.
Scott:
Awesome. Well, would you mind telling us a little bit about yourself and the business you started?
Jack:
Yeah, so my name is Jack McColl. I’m the founder of Credit Stacking. It’s a mentorship program where I teach entrepreneurs on how to dial in their personal credit essentially so they can get access to business credit. On business credit, there are 0% interest business introductory offers, so you can borrow hundreds of thousands of dollars at only a 0% interest rate for one to two years. I specifically teach people, entrepreneurs, on how to do exactly that.
Scott:
Awesome. So walk us through some examples of that credit and why you need to build up your personal credit in order to begin accessing those.
Jack:
100%. So the personal credit profile is the foundation to many, many things in life, not just as a normal non-entrepreneur, but for an entrepreneur as well. If you think about even if you’re not in business, you need good credit to get a good rate on an auto loan, a good rate on a mortgage, to get approved for a lot of good apartments. When you’re thinking about starting a business, maybe you’re already a business owner. The personal credit profile is the number one single most important thing on being able to get high limits on these business credit cards or get any type of business funding through credit products.
The profile is very strong and it’s much more important than just a score. Some people can have a 750 score, but only one or two credit accounts. We’re looking at much more than a score. We’re looking at the entire profile. We want to optimize each of the sections on the FICO report to make yourself as attractive as possible to the lenders. You as a entrepreneur or aspiring entrepreneur can get access to money very, very easily when you need it.
Mindy:
Can you share the difference between a credit profile and a credit score just so we know we’re all on the same page?
Jack:
Yeah, so a credit score is the score you’ll see when you check your credit. Maybe it’s 600. That’s very low. Maybe it’s an 850, which is perfect. If you’re anywhere in the 700 club or 800, you’re in a very, very good spot. Ideally, 750 and above, but really, when you apply for different credit accounts like business credit cards, personal credit cards, different types of loan products, they’re going to look at your credit report or your credit profile. They’re looking at your score, they’re looking at your average age, they’re looking at your comparable credit, which means the limits of your current credit accounts, which means is your revolving limits only a thousand? Is it 10,000? Is it 70,000 of collective personal credit limits? There’s definitely a range there. Also, if they’re taking into consideration the amount of hard inquiries you have on your profile, and essentially, when you apply for a new credit account, you get a hard inquiry.
If there’s too many hard inquiries, you look riskier to the lenders, and one other factor I will mention is the type of accounts are very important. If you have a Chase personal credit card, that account is weighted better on your profile than if you had a credit card at a local credit union because the Chase account is a tier one account. They’re looking at the limits of those accounts and they’re looking at the banks that are giving you those accounts, and then they’re also looking at the diversity in your credit mix. Do you only have revolving accounts? Do you only have personal credit cards? Do you have any installment loans? Are those installment loans paid off? Do you have any auto loans? Do you have any mortgages? If you can create a diversity in your credit mix, it’s going to increase your score then if you only had personal credit cards.
Scott:
Awesome. That’s actually really interesting. I had no idea about the various tiers of credit, of types of debt, and how they would count into the score. I’m 32 years old, but I feel like I’m an old dog now because it used to be, as least my opinion, where there’s just one score, your FICO score, but nowadays, and I’m screening tenants and there’s a renter’s score, there’s a VantageScore, there’s the FICO. There’s FICO 1, 2, 3, 4, 5, 8, 10. What score are we looking at when we’re talking about this? What is the actual number that I should be worried about as a consumer in building up my profile?
Jack:
It’s a great question. So FICO 8 is the score that most lenders are looking at when you’re applying for credit products. When you have personal credit cards, business credit cards and installment loans, they’re looking at that FICO 8. If you’re applying for an auto loan, they’re going to be looking at a different model, but it’s still very similar to the FICO 8.
Scott:
Landlords, of course, are now using this renter score with many applications, which is a whole different one.
Jack:
Number one thing, I will jump in there, Scott, is my favorite place to check your credit score is a platform called myscoreiq.com. It will show your FICO score, and there is a difference between your FICO score and something called a VantageScore. If you look at a lot of the free apps like Credit Karma or CreditWise or any credit monitoring service that’s in your bank app that’s showing you for free, that’s 99% of the time showing you your VantageScore. This is a decent way to look and see what accounts you have, your utilization, the age, things like that, but when it comes to your score specifically, the VantageScore, it can be a much more inflated score.
If you’re actually trying to check your credit before applying for credit cards or any credit products, you want to be making sure you’re checking your FICO score, which you can do on myfico.com, experian.com, or my favorite is myscoreiq.com. For those services, you do have to pay a monthly fee, but if you want to look at the report that you know the banks are going to look at once you click submit, those are where you want to look. Every time I’m about to submit my applications for something, I’m of course looking at that report because I know when I click submit, the banks are going to look at it and I want to see it first.
Mindy:
Okay, that was going to be my follow-up. Is this a free score or is this a paid… How much does it cost?
Jack:
About 30 bucks a month.
Mindy:
Okay, that is interesting. Make the decision based on if that’s something that’s worth it to you. I wouldn’t recommend that if you’re just getting started, if you’re just thinking about this, but once you’re really trying to build up your credit, $500,000 of business credit in a year I think would be worth $30 a month.
Jack:
Yeah. One thing I will say there, Mindy, to start, if someone’s starting a credit, they haven’t checked their credit profile yet, I would start with Credit Karma and Experian because Credit Karma is a free app, same with Experian, just the one bureau. Credit Karma will show you Equifax and TransUnion, which is two of the three bureaus for free. Experian, the free membership, will show you Experian, which is the third bureau for free. You can pay extra on Experian to see all three, but if you want a free option right now, get Credit Karma and Experian and then you can check your reports on all three bureaus. It is important to check all three bureaus because each bank is going to pull from a different bureau.
For example, if I’m in California and I apply for a Chase credit card, I know that Chase is going to pull from Experian, but if I’m in, say for example, maybe Texas, Chase might pull from TransUnion in Texas, and so, I want to know what each bureau looks like based on where I live because they could be pulling from a different bureau, and so, the hard inquiries could be different from bureau to bureau. The accounts reporting could be different from bureau to bureau, and so, you do want to check all three, not just one.
Scott:
Just to hammer this point home, what is the difference between the number I see in Credit Karma and then the credit score that shows up when I apply for a mortgage, which is different a lot of the time? What is the reason for that and how do I view that number?
Jack:
So if you go onto MyScoreIQ, you can see all of your different scores. FICO 8 is what you want to look at if you’re going to be applying for personal credit cards. There’s an auto loan card, there’s a mortgage card, just different profiles depending on the products you’re going to be applying for, but again, back to Credit Karma, it’s going to show your VantageScore, which is probably an inflated score. It’s very helpful to see how many accounts you have, what’s your utilization at, how many hard inquiries do you have, what’s your average age, things like that, which is definitely valuable and it updates daily, which is also very helpful, but when you’re looking at your score, it could say 780 on Credit Karma, but if you check your FICO score on MyScoreIQ, it could be maybe only 720, so maybe you want to work on it a little bit more.
Mindy:
But there isn’t going to be a gross difference, right? You don’t check Credit Karma and it says you’ve got an 800 and then the banks are pulling and it says you’ve got a 410. There’s not going to be a gross difference, right?
Jack:
The difference won’t be that big, but where it’s very important is if Credit Karma says 720, but your FICO score is 690, to be in 690, you’re going to get much worse results than if you thought you had 720.
Mindy:
Okay, that’s a good point.
Jack:
Yeah, because they’re looking at FICO score, not Vantage, so you always want to check FICO before you do the applications generally.
Mindy:
Okay, so let’s talk about business credit versus personal credit. Can you get business credit if you don’t have personal credit? There are some people in the financial space. The biggest one is Dave Ramsey who recommends not having any credit score. I want to clarify that the FICO score goes from… Is it 300 to 850? If you have a zero credit score, that’s way better than a 300. That means you have nothing as opposed to actively bad credit, but if you have a zero score, are you going to be able to get business credit?
Jack:
Absolutely not. I think for someone not to build strong credit is probably the most irresponsible advice I have ever heard. Not just for business owners, but for non-business owners. Like we said at the beginning of this podcast, you need a good credit score to buy a house, to get an auto loan, to get into some apartments. One of my good friends from college, actually his dad was on the big Dave Ramsey train about budgeting, no credit, et cetera, so my friend, he didn’t build credit. He tried to go buy a house at 25 years old and they laughed at him because he didn’t have much on his credit profile. He wasn’t able to buy a house for him and his brand new fiance, which is quite embarrassing. Even if you’re not in business, it’s very important to build your credit because you can just do so much more when you have a good credit score.
Then if you want to get into business or if you’re already in business, by having a strong score and a strong profile, this now gives you the ability to get access to 50 to $200,000 at 0% interest for the introductory period, which is between 9 and 18 months. Now, some people will say, “Well, that’s fine because I don’t need that much money right now.” Okay. Maybe in 6 months or 12 months when this recession hits hard and you’re trying to take advantage of discounted assets like purchasing more real estate or you need capital to keep your business afloat, you will want good credit because if you have good credit, you can essentially snap your finger and get access to this type of 0% interest capital, but if you don’t have good credit and you don’t start building now, it can take many, many months. When you need that capital, you might not be able to do it.
Scott:
Yeah. I’ll qualify this a little bit by saying it’s not always true that you need personal credit to build business credit, but you can find exceptions if you’re a nitpicker, but this statement is overwhelmingly true. BiggerPockets or a large business could go out and get a loan from bank, or if you have a large real estate portfolio, you could find a non-recourse hard money private lender to do it, but by and large, you’re going to have a very difficult time getting any type of loan for your business if you don’t have good personal credit. Is that a good qualifier, Jack? Would you agree with that?
Jack:
Yeah, I would Scott, but what I would say to go off of that is if you’re going for financing on products that pull your personal credit score, you will need to have good personal credit. Specifically, the 0% interest business credit cards that I was referring to, those required no income verification and no tax returns. A business with solid, very strong tax returns, bank statements, et cetera, it would be easier for those businesses to go out and get business loans, but you have to show the financials and on a business loan, you’re paying interest. For 0% interest business credit cards, all you need is an optimized personal credit profile, and I’d love to go into that deeper as well to give you guys more context and tangible strategies, but having that profile and providing no income verification and no tax returns, that’s how you can get access to over a hundred grand 0% for 12 to 18 months.
Mindy:
Well, just tagging off of Scott’s comment, maybe you can get this credit or maybe you can get a mortgage with no credit history like the Dave Ramsey, they’ve got the… What is it? Manual underwriting. You’re just making it so much more difficult. You’re just making the process so much harder. In this real estate market that we find ourselves in right now, it’s starting to heat up in Denver. I’m starting to hear from all sorts of agents around the country that the market is heating up. Maybe not quite as hot as last spring, but definitely hotter than the last six months of last year.
To make it harder on yourself, you’re going to make it infinitely harder because if… I just listed a house on Friday. It’s Tuesday now. I have seven offers in my hand that I have to now figure out which one I want. Somebody who has manual underwriting and is going to be a nightmare to get, you’re automatically off the table. You have already lost the opportunity to buy this house because you’re weird, you’re different, you’re difficult, and you can choose to live your life any way you want. I’m not the boss of you, but I’m going to tell you, you’re going to make it a lot more difficult. I wish I was the boss of you because I would then be able to tell you, “Stop doing this stuff. You’re making it harder on yourself.”
Jack:
I agree, Mindy, and I think having good credit is a very alpha thing for any individual to have. It makes yourself stronger as a person in society, makes yourself stronger as a business person, and it makes your life much, much easier. Not even to mention the personal travel cards you can get where you can get all these hundreds of thousands in points where you can get free travel. We can go into that in a little bit, but Scott, one thing I will want to tag on there, you mentioned something about building business credit. One thing I will say on that is you can build the business credit score, but to get access to business credit cards, it’s not even necessary for people to build a business credit score. The only thing you need to have is an optimized personal credit profile, a business entity ideally in a low risk industry, which we’ll dive into as well, and then some sort of banking relationship and then understanding what cards to apply for, when to apply for those cards and how exactly to apply for them.
Scott:
Awesome. Let’s get into that. Walk us through some of these incredible debt products that you’ve advertised here earlier in the show and how do I get access to them? How do I set myself up to use these as a tool?
Jack:
100%. So really, what I highly advocate and I think is so incredible, which is pretty much a newer product to the world, is 0% interest business credit cards, which is 0% for the introductory period of 9 to 18 months. After that period, it goes up to the normal 15 to 20% credit card interest, but you have that introductory period where you’re not paying interest. To do that, like I keep mentioning, strong personal credit. Do you want to dive into how to optimize your personal credit profile so you can do that?
Scott:
Yeah. Let’s talk about these products and what you need to do to get there. That’s perfect.
Jack:
Perfect. Okay. So 0% interest business credit cards, let’s talk about that, because that is my favorite for sure. To prepare yourself, to make yourself attractive to these lenders, you want to build your profile, and so, you want to have a specific amount of revolving collective limits. Ideally, I want to see at least a collective $15,000 in personal credit limits. Say you have a $5,000 card, a 2000 and a 10,000. Great, you’re at 17,000 of collective personal credit. That’s what I like to see. If you’re someone that has maybe only $5,000 of collective personal credit limits, I would recommend to go out and apply for, what I like to call them, high limit personal credit cards, and I’ll list them. One card that I see gives very, very good limits is the Apple Card. Another card is the Chase Freedom Unlimited, and then thirdly, the American Express Delta Gold.
I’ve seen those three cards give the highest limits. If you’re someone listening and you have lower limits, you want to build up that comparable credit because the higher limits you have on your personal cards, the higher limits you’re going to get on the business cards. That talks about comparable credit right there, but before you start applying for any type of accounts, you want to make sure your utilization on every revolving credit account on your personal credit is under 30% utilization. You can use the full balance on your personal credit cards, but you just have to pay it down to 30% at least four days before the statement closing date, and each credit card is going to have a different closing date, so you can log onto the app and you can check and just make sure you bring your balance down to under 30% four days before that statement closing date.
Once you can confirm all the revolving accounts are paid under 30%, then you can consider applying for these personal credit cards to build up your comparable credit. Another thing you’ll want to keep in mind is the amount of hard inquiries you have on your personal credit profile. If you have more than two in the last six months on any of the three bureaus, it’s getting on the high side. There are different credit repair companies that you can hire so they can actually dispute and remove those hard inquiries to allow you to get better results moving forward. We’re looking at the amount of hard inquiries. We’re looking at the percent of utilization on each revolving account, not just the average, but each account. Then we’re looking at your comparable credit.
Once you have no more than two hard inquiries in the last six months, once all your revolving accounts are under 30%, then you’re okay to… I also should say no late payments in the last two years and no collections in the last two or so years. At that point, you can apply for the personal cards to build up your comparable credit. Then fast-forward, it’ll take 30 days for those accounts to report. Say you fit all that criteria and now you have over $15,000 of collective personal credit limits. At that point, you’re probably in a good position to start applying for these 0% interest business credit cards.
Scott:
Jack, how would I use my great personal credit score, and this checklist that you’ve identified for us of 15,000 in personal credit limits, keep my utilization under 30%, making sure I don’t have any hard inquiries or any other derogatory marks? How can I then leverage that to get access to financing for certain business initiatives?
Jack:
Yeah, so once you fit all those requirements on your personal credit profile, once it’s optimized, I keep liking to call it, then you want to figure out what banks you have available to you in your specific state. If your business is registered in California, that’s going to give you a specific list of banks. If you’re in Florida, that list is going to be different. If you’re in New York, that list is going to be different. You want to do some research to find what lending options you have available to you in your state, which an easy way to do this is type in California banks who offer 0% interest business cards. Start to put together a list.
Some of the banks you will want to have an open business checking account. This is to start to build that relationship with the bank so they can get more of your personal and business information, so ideally, you can put a little bit of money in that account so they start to trust you more, but not all banks need open business checking accounts, but the two most important banks to do that at before applying for business credit accounts is going to be Chase and Bank of America.
Doesn’t matter what state you live in. I would highly recommend to prioritize building your relationships through Bank of America and Chase. Chase being number one for sure. Chase has many branches, the best online platform, and they give out the highest limits, up to a hundred thousand dollars of 0% interest capital between one or two credit cards. To do that, go into a Chase branch, make an appointment, open up a business checking account for your business, tell them what your business does. They’re going to then open that account for you.
At that point, I would let a little bit of money sit in that account for a few weeks and then if your personal credit profile is good, you’re ready to apply for the cards, then go for an online application or you can apply in branch as well. Those are the first two ways you can apply for these business credit accounts, but the best way and the most effective way to get exceptionally high limits is through business relationship managers. These are the individuals that work directly with the underwriting teams. If you can get assigned a business relationship manager, that’s where you’re going to get the best limits.
Scott:
Awesome. What businesses are these types of credit cards most accessible to? I think there were some industries that it’s easier to get one and other ones where it’s harder. Is that right?
Jack:
Yeah, so it all comes down to the industry risk. The banks will look at the NAICS code and that will classify the risk for your business type, so if you have a construction business that’s a little bit more risky than say for example a consulting business, because they’re looking at the overhead expenses that businesses in that industry is going to have. A consulting business, there’s not too much overhead. A marketing business, there’s not too much overhead there. If you do wholesaling, if you think about what that business does, it’s a lot of marketing.
It’s a lot of lead generation. It’s a lot of finding the buyers. A wholesale company, how much marketing does that do? Could that be a marketing business? If you look at a physical gym, that’s going to be much more high risk to the lenders. Something to consider, the lower risk your business is, the higher chance you can get these high limits, but again, the most important thing is optimized personal credit profile, also the bank relationship. Then it comes down to what type of business do you actually have?
Mindy:
You just said something about a business relationship manager. That sounds super fancy and like my company has to be big and have a lot of money. Is there a minimum income threshold or business size or something before I can ask for this or before I can expect to get something like this?
Jack:
Generally, if your business isn’t anticipated to do between 1 and 2 million or above, that’s when you’re able to get a Chase business relationship manager. Each banks have different thresholds, but Chase is at the one to 2 million threshold of revenue. Of projected revenue, I should say.
Mindy:
Okay. So that’s more of a maybe down the road thing, but definitely something to bring up and talk to them about when you’re starting this out. I really think the most information that you have is just going to help you process everything. Oh, I didn’t know this was an opportunity. Maybe if you ask about business relationship manager, they say, “Hey, your business doesn’t qualify now, but there’s another program,” or, “We’re rolling out this pilot project,” or whatever. I think that asking questions is always the best opportunity. Always the best option.
Jack:
I agree. Ask those questions, build that relationship for sure. Yes, Scott?
Scott:
Jack, what about some more advanced options here? This sounds like a great way to get a credit card to fuel some of your next entrepreneurial endeavors, but what if I want to use an SBA loan, for example, to make a small business purchase or combine some sort of debt to finance an acquisition with a credit facility with seller financing or those types of things? Can you walk us through any more next level examples of how to use your personal credit to finance interesting investment opportunities?
Jack:
Yeah, for sure. Another good credit product to talk about, there’s really two I want to go into. One being a business line of credit. There’s some banks that you don’t need business financials like tax returns or bank statements like Truist, PNC, KeyBank are a few of them, but most banks will require two years of previous tax returns and bank statements and the more attractive those are, the higher amount of a business line of credit you can get, and essentially, what a business line of credit is it’s an amount of money that you have access to and you only pay interest on the money when you’re using it. For example, a 50K line of credit, you can get at KeyBank.
They don’t require income verification, no tax returns. The 50K, you can pull 30K of it, and when you have that 30K, you’re going to be paying interest on that 30K, but once you give the 30K back, then you’re not paying interest on that product anymore. If you’re a business owner that has these very strong financials, tax returns, profit and loss statement and attractive bank statements over the last three months, they’re going to give you a specific amount on a loan based on your revenue and profit figure. Generally, they’re going to lend about 10 to 20% of your top line revenue.
Scott:
Awesome. I’ve talked to some folks who run businesses and they’re like, “Oh, I keep 50 or 100K in the business,” and they’re trying to invest. Well, why don’t you just open up a line of credit and you can pull that number down to 25 or something like that and probably be able to conservatively operate your business, not have worries about that. I think that’s a fantastic tool to add in there. What types of business credit loans, whatever, are dependent on your personal credit score?
Jack:
Anything that pulls your credit is going to be based on your personal credit profile. The 0% business cards, the business lines of credit, the term loans are all going to be based on your personal credit profile. If you do hard money, probably not. They’re not going to pull your credit. If you do any private loans, they’re not going to pull your credit, but credit is pulled for most credit products.
Scott:
Well, Jack, is there anything else that we should know about when it comes to credit and using your personal credit to access really great debt and harness it for incredible investment opportunities?
Jack:
Yeah, so I think for the business owners listening or maybe you want to get into business soon, the first step to get into business lending, I think the easiest and most effective is for these 0% interest business cards because it’s no income verification. If you’re a little bit more advanced, then that’s when the business lines of credit or the term loans come into play because not only do you need that good personal credit, but then you have to show those business financials. That’s the next step to graduate to, and then additionally, you can also start building out your business credit scores. It’s interesting, and actually one thing I have not mentioned on this podcast is business credit accounts, they don’t report to your personal credit profile. If you max out a personal credit card, it’s going to highly negatively affect your score.
But if you get approved for a 50K business credit card and you max that out, because that account doesn’t report to your personal credit profile, your score stays unaffected. This is exactly how I’ve been able to get approved for a half a million dollars in business credit in just over a year while using the business credit because those accounts don’t report to your personal credit profile. That’s a key. It’s much less risky to leverage business credit than it is personal credit for your business because if you have a high balance on a personal card and you can’t pay that back, your personal credit score is wrecked, but if you have a high balance on a business credit card and you can’t pay that down for the next few months, your score is still unaffected. You can always get approved for another business credit card and balance transfer the balance from the first card to the second if you need more time for 0%.
Scott:
Jack, I have a question here. Let’s suppose that I have a flipping business. So I’m a house flipper and I’ve got $500,000 in a business line of credit or a business credit card with a 0% APY for the first year and I’m being responsible, so I’ve also got my paid off home, which I could borrow against in order to repay that. Would you recommend to someone in that situation to consider using that 500,000 to fuel my next flip instead of going to a hard money loan or taking out a HELOC on my primary, assuming I can complete the flip in the first year? Would that be a use case for this?
Jack:
I work with many, many people that do exactly that. If you can get access to 50 to a hundred thousand dollars, imagine how many more deals you can do, and then even when you get to the point where you’re paying that 15 to 20% interest, a lot of times, people can do flips in a three to four month period, maybe six months, and you’re not even having to pay that much in interest, but if you’re borrowing it for free for the first year, I know so many people that can do two flips just during that introductory period before they pay any interest on the card.
Scott:
Well, I think it’s a really intriguing and interesting tool here and like any tool, it can be used to propel you forward and you can hurt yourself with it if you’re not being smart. It sounds like a really interesting option for some folks that want to have the opportunity for better rates. Did you have any final credit card hacks for our audience before we go?
Jack:
Credit card hacks. One thing I will mention is if you’re someone that loves to travel or maybe your business requires some travel to go visit possible deals, to go visit business partners, et cetera, another major importance of having good personal credit is to get top tier cards that generate points and rewards. I have cards that get four X points per dollar spent. If you have a good score, you can get access to the best credit cards, which will generate you the most amount of points and miles, so you can use those points for free travel. That is another major, major value add of having good credit if you’re someone that likes to travel or your business requires travel.
Scott:
Awesome. Is there a good resource for folks. I understand that credit card hacking can be like a full-time hobby essentially. You can really go down deep into that world. Is there a place for folks to go to get started and learn a little bit more, begin dipping their toe in, find a couple ones that might make sense for them?
Jack:
Yeah, 100%. I actually have a link in my bio on my Instagram where I have my favorite personal credit offers, which my Instagram is @kingofdebt. @kingofdebt on Instagram. If you click the link in my bio, you can see a link to my favorite personal credit cards and they’re there for a specific reason. A lot of people don’t understand what options they have available to them, what benefits these cards come with, and I’ve put together my list of my favorites.
Scott:
Awesome. Well, we really appreciate you coming on, Jack. Thanks so much. It sounds like folks can find out more about you @kingofdebt on Instagram.
Jack:
That’s correct. Thank you, Scott. Thank you, Mindy. Instagram @kingofdebt. Hopefully, I’ll see you guys there and thank you guys so much for hanging in.
Mindy:
Thank you, Jack. We’ll talk to you soon. All right, Scott, that was Jack McColl and that was a lot of fun. I learned a lot about credit, specifically the credit profile. I think that’s a very interesting term and I’m hopeful that our listeners were able to learn something about credit and credit scores and how to generate business credit so that you can go on to fund your business as well.
Scott:
Yeah, like I mentioned, I think this is a tool and it can be a very dangerous tool or it can be something that spurs folks on and who are we to say don’t lever up when you’re getting started to go and crush your goals. When I was starting out my financial journey, I bought a duplex making $48,000 a year for 240 grand, five or six times my annual income in debt to purchase that. Of course, that’s a dangerous all in move, and I think some folks will feel that they have to take that to some degree to do this, but recognize that if you’re financing a big investment on a credit card, even at 0% and you don’t have a backup plan, that can really put you in trouble if things do not go according to plan, and so, I’d really, really encourage folks to consider this as a tool, but really be wary of it and not get addicted to it, for example, if you do decide to go with it once and it works.
Mindy:
Just like with any real estate investment that you’re doing, with any startup business that you’re doing, have backup plans, have backups for your backups. “I’m opening up a HELOC.” That’s great. What else do you have in case this doesn’t work out? Or you’re opening up a business line of credit that has a 0% interest rate for a year. Great. What happens on month 13? You should be thinking about these things before you take a dollar out of the account. Before you borrow any money, you should have a plan to repay it because if you don’t, that’s just irresponsible.
Scott:
As always, again, I harp on this all the time, map your debt to the use case. Use short-term debt for short-term investments or short-term needs. Don’t use short-term debt for long-term needs. That’s how you get in trouble when things don’t go as planned. Map those use cases and be smart about it, but really cool tool and it’s really impressive how Jack has clearly outlined each of the steps necessary to build your credit and get access to the first serious round of financing or serious access to a credit line for a lot of folks.
Mindy:
Yep. Huge thanks to Jack for his information today. All right, Scott, should we get out of here?
Scott:
Let’s do it.
Mindy:
That wraps up this episode of the BiggerPockets Money podcast. He is Scott Trench and I am Mindy Jensen saying toodle-oo, kangaroo.
Scott:
If you enjoyed today’s episode, please give us a five star review on Spotify or Apple. If you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpocketsmoney.
Mindy:
BiggerPockets Money was created by Mindy Jensen and Scott Trench, produced by Kaylin Bennett, editing by Exodus Media, copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
