Do I need good credit if I have the cash?

Question

Guys, If i have the cash to invest in flipping homes, will I ever use/need my credit? If so, when or how in example? 
Do I have to make an effort to keep it in good standing since I have cash, or I can be without?

Thanks

Bill Gulley · Answer

You can finance more properties than you could ever buy. In RE, you credit is the one of the  most important things you can have, IMO, your reputation comes first, then credit and money walk hand in hand. I can always do some deals with no real money down, because I can use knowledge, my reputation for getting the deal done and someone else's money.    If I want to do more deals, I can use my money, if I want to do alot of deals, then credit is handy.

Your comment was kinda like do I need good credit if I have money? Well, what about your reputation, does your credit not reflect upon your ability to carry through with what you say you will do?

J Scott · Answer

If you have enough cash to flip one house at a time, what happens when you want to start flipping 2 houses at a time?

Or if you have enough cash to flip 20 houses at a time, what happens when you want to start flipping 40 houses at a time?

While cash is king, credit is queen...and who do you think is really in charge of the castle?  :)

Account Closed · Answer

It may be worth talking to an attorney.  There are attorneys that specialize in credit issues at least there are some in Seattle, WA.

It seems to me that you are not legally responsible for this debt any longer based on what you were saying.  If the credit cards wreck your credit you may have a civil claim for damages that might be caused.  The only way to know for sure is to consult with an attorney in this area of law.

Bill Gulley · Answer

Yes I have a thought. You have money? Use some and pay your attorney to get the court to order that she take the debts in question, if that's not already done. Spliting spouses should never share a debt after a divorce. Never, trade something else for your half or get something from her and you take it.

If she ends up with it, go to the lenderand request to be removed, many non-secured creditors will do that with a court order.

If you get the debt, refinance it to a managable payment.

Every payment you make for her is just giving her more out or the settlement. Contact your attorney!

Joel Owens · Answer

I think everyone is getting messed up here.

Creditors do not give a rats as$ about a divorce decree for the judge.

This is one of the most common credit problems I would run into working with buyers on the residential side.

The buying party would claim their former spouse  was ordered by the court and did not.Therefore the credit companies came after them for payment and they either didn't have the money  or wouldn't pay it.

The credit companies on joint accounts that were formed before the dissolution of marriage do not recognize divorce decrees.

The credit company sees it as you BOTH owe the debt.This is why I keep separate accounts on everything.I love my wife dearly but I was divorced once before and having everything separate made it so much easier later on.

So unless you get a release from the company  the legal standing is you signed an agreement to be legally responsible for that debt.

Even with a court order she can say she doesn't have the money to pay.If that's the case you will have to pay them off or ask for a reduction in the interest rate on the credit card.

Are these cards frozen now meaning you are just paying off the balance??I would pay the minimum to preserve credit and then when you sell a flip pay them off.

Make sure nothing additional can be charged or used.

Nick Henson · Answer

Lousy exes! You really want to have more options than limitations in this business. When you are ready to apply for credit, some lenders will actually accept a story like yours IF you have all the supporting documentation. Have another run at it with an attorney just to show you tried, if nothing else comes of it.

Chris Vasquez · Answer

LOL, I hear ya. Just make sure you get a receipt for everything penny you spend. From work done all the way down to a box of nails. You can write it all off your taxes. As far as contractors, pay them with a check. I feel better knowing there is a paper trail. Especially if the tax man commeth.

J M. · Answer

the debt was assigned to her per court order. Credit card companies won't take me off as they said they don't legally have to do it. I refuse to pay that off since we are talking about almost 20 grand that accounts for HER car (we paid off her car note with those cards to get a cheaper interest rate) plus I don't have a million dollars to pay that off and still be able to rehab my first house. Let's say I have enough to buy a 70k home and put another 30 in rehab. 
So basically, I see it inevitable to have a dent on my credit as we stand. I am sure that many investors have come ahead in their careers even after having a bankruptcy, so I don't want to drown in a glass o water, but I do want to know what I would be missing by messing my credit a bit, let's say 6 months for what it seems. This just really sucks, but I have faith in the future. 
Is it a bad idea to pay your contractors and materials with cash? 
Chris: The new wife can wait as I will not be marrying anytime soon,... :)

Chris Vasquez · Answer

Can you bite the bullet. Pay off the cards completely. Close the accounts. Save your credit??? Your gonna need that credit to pay for fix up of the houses. Contracted work, Home Depot etc... If you ruin your credit you will be relying completely on cash. 
Think of your paper trail for right offs when tax time comes around also recourse when the work is not done properly. So much easier. Plus its leverage during the property holding period. You may need the cash for an emergency. Like a new car,a trip to Vegas or a honeymoon vacation with the new wife to piss off the Ex. Ya never know. Seriously, do what ever you can not to screw up your credit.  Go to ehow.com search Bankruptcy discharge. Good info. I hope that helps. We're not all as lucky as J Scott.

J M. · Answer

I agree that your reputation is extremely important and that credit should reflect this.

I am asking this question because I may be really close to getting my credit damaged and at the same time I am just starting to set up my business and looking for my first, of hopefully many, flip. 
I have never been late and have excellent credit, but I got divorced last year and have 2 joint accounts that the ex agreed to keep paying, but stopped. I have been paying them for the last couple of months to avoid hurting my credit, but this is not fair nor do I want to keep paying something I shouldn't. The ex wants to let them go to collection in hopes to settle them at 50% but the cost of this is MY CREDIT will be ruined! If this happens and my credit gets screwed for, lets say, a 6 month period of having lates and finally a charged off or settled accounts, will this doom me? for the near future as an investor? I am not foreseeing using my credit anyways for the next year or 2 as I should be fine, as a newbie, just doing one rehab at a time using my own cash. thoughts?

Do I need good credit if I have the cash?

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