How I built a credit from $ 500 to $ 500,000


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I was raised to believe the debt was bad. If you needed a car, you paid cash. Ditto for groceries and clothes and most other things. You paid with paper money or left without. A credit card was a one-way ticket to insolvency and despair.


It was a state of mind of freedom from serfdom. A healthy mindset, overall – if maxing out credit cards and crushing student loans aren’t some form of bondage, I don’t know what it is.

When I decided to drop out of school and start my own business, I quickly discovered that there was a lot more to the story. Debt, although a burden, did not have to be ruinous. In fact, it was an absolute necessity for any entrepreneur with higher ambitions than a lemonade stand.

Related: 5 Ways To Take Control Of Your Money In 2019

Going into debt and paying it off is the only way to build a solid credit report. A strong credit history leads to strong credit scores. Strong credit scores mean you are a trustworthy candidate for financing. And financing, for a business owner, makes the difference between a chance and a failure.

My complete lack of credit history was a huge handicap. I needed a loan to prove that I could pay my bills on time, but no one would take the risk as they had no proof that I had paid my bills in the past. It was a deep pain in my neck, but after a lot of trial and error I figured it out.

One experience in particular captures most of my education in school credit hard knocks. My adventures with American Express, where a credit limit of $ 500 increased to $ 150,000 before I was 25, teach lessons that apply to all types of business financing and can be illustrated in three simple steps:

1. Prepare to start small.

Business credit cards are a great way to build a business credit history. All you need to do is keep the balance low, make timely payments, and follow up to make sure your provider reports your good behavior to the credit bureaus. Add in benefits and rewards that can be tailored to meet your business needs, the convenience of separating your personal and business finances, and detailed breakdowns of your monthly expenses at no additional cost, and you end up with an invaluable tool all the way. budding entrepreneur should take advantage of.

It took a while to figure this out as a young man, but when I finally did, I applied to American Express. They told me that if I sent them a check for $ 500, they would send me a credit card with a limit of $ 500.

It was 100 percent guaranteed. You could almost call it a fake credit card, because I was borrowing against my own money. In my opinion, a payday loan would have been more respectable, because at least in this scenario I wouldn’t have to fork out the money they were going to lend me.

It didn’t matter. Beggars cannot choose, and a start is a start. Keep this in mind as you begin to build your own credit history. Something is better than nothing, and if you persevere, your fortunes will improve.

Related: 5 Ways To Keep Your Business Finances Healthy

2. Use your business card a lot and pay it off on time or sooner.

It was a pain in the ass, but I used this card constantly. I maximized it and paid, I maximized it and paid, I maximized and paid, flushed and repeated, month after month.

Slowly but surely I was showing myself a safe credit risk. I did it through pure, stubborn, mechanical repetition. This principle is true in any human endeavor. If you want to master something, do it over and over again. There is no shortcut. Think of your business credit card like a guitar – you have to play it every day just to get the hang of it.

Make the most of the tools provided to you. Learn the rewards system and tailor it precisely to your business needs. Stay up to date with your online statements and keep track of how, when and where you spend. Be deliberate in your purchases – only buy what will build your business.

3. Be proactive in increasing your borrowing capacity.

Once I was up and running with my $ 500 credit card, I started a regular campaign to ask American Express to increase the limit. Eventually they increased it to $ 1,000 and then to $ 2,500.

My business has grown as a result. In six months, it doubled in size. I used my $ 2,500 credit limit just like I used the $ 500 – by running on the card and paying it off weekly. I called American Express several times to give them progress reports – “Look, my business is booming, what can I do to extend my credit even more with you?” “

It was a beautiful day when they finally increased my limit to $ 10,000. What was even nicer was that they returned my check for $ 500. It was a humble but meaningful sign that a large corporation had decided they didn’t need collateral to back me up – I was worth the risk.

Related: 5 Tips for Getting the Business Credit You Need to Start and Grow Your Business

The nicest thing of all, however, was that American Express had reported my trusty payments to the credit bureaus. It was just a business, and my initial limit of $ 500 had been pitiful, but that didn’t matter. What mattered was that I had treated that $ 500 as a valuable resource. The credit bureaus didn’t care that my monthly payments were low; they only cared to be on time.

My credit limit with American Express has steadily increased from $ 500 to $ 150,000 (on several different cards). The fact that I was building a strong credit history along the way meant that I could apply to other lenders with increasing success, and eventually I had a total of $ 500,000 available to me on an array of cards. business credit and lines of credit, all before I was 30 years old.

I realize that $ 500 to $ 500,000 is a dramatic difference, but the road connecting the two numbers is as simple and straight as it gets. Apply for a business credit card, use it aggressively to grow your business, and never miss a payment. Follow this line regularly, and one day you will be free to walk in any direction you choose.

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