According to the Spectrem Group, in 2005 there were 7.5 million millionaires in America. One way to leverage credit to generate wealth is by having a good credit score. Having good credit can save you thousands of dollars over the life of a loan. Even just 1 percentage point can save you $20 to $300 dollars a month. The money saved can be used to invest, or borrow money to purchase assets to generate wealth. A good credit score usually 700 or above can help you in a number of ways, including the following:
• Increase your financing options
• Get the lowest interest rates
• Allow you to pay less for purchases
• Spur competition between companies for your business
• Invest in profitable opportunities
• Establish a solid credit rating
• Get approval for larger loans and higher credit limits
• Provide quicker approval times
• Look favorable when applying for a job
Here are 5 ways that you can leverage your credit to generate wealth:
1. You Should Become a Homeowner. Becoming a homeowner increases your credit score, proves that you are a responsible spender, provides a tax write-off, and provides you with an asset that will appreciate over time which increases your net worth.
2. You Should Purchase Investment Property. Investment property provides cash flow that can be used to generate wealth and allows more opportunities to become available to you. Do research and buy books on buying investment property, join a real estate group, and listen to financial investment shows to find out the best way to get started.
3. You Should Start a Business. Discover what you love to do more than anything else. Do your research before starting your business and take small steps. Start your business in your home to get the feel of running a business. There are also many tax write-offs for home based businesses.
4. You Should Use Venture Capital. Use venture capitalists to invest in your business. Venture capital is a fund raising technique for companies who are willing to exchange equity in the company in return for money to grow or expand the business. Venture capital firms often want a high rate of return 20% or more and will finance the business with $500,000 to millions of dollars. A venture capitalist also wants greater control of a company and a quicker return on their investment.
5. You Should Use An Angel Investor. Use angel investors to invest in your business. An angel investor is an affluent person who provides capital for a business start-up, usually in exchange for convertible debt (a bond that can be converted into shares of stock in your company) or ownership equity (remaining interest in all assets after all liabilities have been paid). If assessments of assets do not exceed liabilities this will result in negative equity and cannot provide ownership equity.
The key to leveraging credit to generate wealth is to develop good spending habits, live within your means and maintain a good credit score. The higher your credit score the less you pay for a loan and the easier it will be to establish business relationships, gain new clients, and generate wealth.