A few years ago, I read Russ Whitney’s Building Wealth. It was a book that described how Whitney went from being a high school dropout to becoming a multimillionaire in real estate. One of his chapters focused on establishing credit at local banks. One of the tactics he used captured my attention. It was so intriguing that I tried it myself when I was living in Las Cruces, NM. The idea was to turn $1,000 into $5,000.
It started out with $1,000. In my case, I used $1,000 that I had in savings to begin the process. Other people have used credit cards to begin the process.
The first thing I did was I went to a credit union that I had no prior banking experience with and opened up a savings account. I deposited the $1,000 with the bank and then went to the loan department. I spoke with the banker and established rapport with him. At the end of our conversation, I asked him if I could take out a signature loan against my $1,000 in savings. By taking out the signature loan against my loan in the savings account, I effectively tied up my savings, but ended up with a $1,000 check.
The next step required that I go to a second bank and repeat the process. I went to a second credit union and opened up a savings account. After the money was deposited, I met with the banker and asked him questions about the types of loan products that the bank managed. At the end of the interview, I took out a signature loan against my savings account there.
I did not stop at the second bank. I repeated the process at a third, fourth, and fifth bank. By the time, I completed the process, I had $5,000 in savings and $5,000 in signature loans. Not only was I establishing credit at all the banks, but I was also establishing rapport with the bankers.
What did I do after I had the money? Under Whitney’s system, I paid off the first loan with the signature loan that I received from the fifth bank. This freed up the savings account from the first bank. I closed out the savings account and used the $1,000 to pay off the signature loan at the second bank. The savings account at the second bank was now freed up to pay off the loan at the third bank. So, I closed out the savings account at the second bank and paid off the signature loan at the third bank. The process repeated itself until after I paid off the loan at the fifth bank, I was left with $1,000 in my savings account.
Effectively, I had established credit with the local banks with little more than my $1,000. The next time, I needed credit for a loan or mortgage, I could point to the fact that I had borrowed money from the institution and had paid off my signature loans in a timely manner.