Black Entrepreneur Blueprint 626 - Jay Jones - How To Use The Credit System To Build Wealth

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[00:02:00] Welcome to Black Entrepreneur Blueprint, the number one podcast and resource for black entrepreneurs. I'm your host Jay Jones and Black Entrepreneur Blueprint was created specifically to educate and inspire black entrepreneurs to launch, build and grow successful, sustainable businesses. Join us as we help build an economic power base in the worldwide black community by building and supporting black owned businesses.

[00:02:29] If you're currently an entrepreneur or want to be an entrepreneur, you're invited to join us each and every week here at Black Entrepreneur Blueprint. Welcome to the BEB family and get ready to elevate your entrepreneur IQ. Welcome to the Black Entrepreneur Blueprint, episode number 626.

[00:02:56] I'm your host Jay Jones and today we have another outstanding and informative show in store for you. Today we're doing part two to a series that we're focusing on on access to capital. Part two of access to capital and today's show topic is how to use the credit system to build wealth. How to use the credit system to build wealth. Now last week we discussed how credit really works and why most people never learn it.

[00:03:25] So as I said on last week's show, make sure that you tune in and listen to both parts one and part two, because access to capital is paramount to grow and scale your business. And as we'll see today, it's good obviously to build wealth. Today we're going to talk about why wealth builders think about credit differently, how credit creates opportunity, strategic ways entrepreneurs use credit and more.

[00:03:54] But before we get to today's show content, let me just share a few things with the Black Entrepreneur Blueprint family. First and foremost, I want to welcome all first time listeners to Black Entrepreneur Blueprint. Welcome to the BEB family. Please stick around until the end of today's broadcast and I'm going to share all my social media contact information and resource links, such as the link to one of our new partners, 1-2-3-4, my new credit score. That's the numbers.

[00:04:21] 1-2-3-4, my new credit score.com. If you have problems with your credit, if you need to position yourself to have access to credit, you're going to need to have good personal credit, obviously a good business credit. This is a great AI back product, software product that helps you restore your credit. And it's only an investment of $29 a month and it is cancelable at any time.

[00:04:50] Go to the numbers 1-2-3-4, my new credit score.com and learn more. And I promise you, I've used this in the mortgage business for some of my clients and I've been able to turn people around in terms of credit. And I just helped somebody refinance their home. Uh, literally last week they came in, they started using the app 1-2-3-4, my new credit score.com.

[00:05:15] And they came back within 90 days and I was able to get them financed to, uh, refinance their property and be able to take out some cash and do some of the things they needed to do for home improvements. So I'm personally going to vouch for it. Check it out. Now let's get ready for today's show content. So last week I talked about, uh, understanding credit, what lenders look for.

[00:05:40] And it's always a, from a risk or the perspective of the actual lender, what type of risk are you? So it's a risk model that determines if you get access to capital and being able to position yourself as a better risk, obviously just opens up that access to capital. So you want to understand like how credit works. That's half the battle, but the real advantage comes from knowing how to use the credit system strategically. Okay.

[00:06:07] Now, what if I told you that two people could earn the exact same income, but one person earns wealth much faster than the other. And the reason is guys is called leverage. Okay. Most people use credit to buy stuff, right? When really you should use credit to build assets. There's a big distinction in last week's episode, number six, 25. If you hadn't listened to that, go back and listen to that first.

[00:06:34] It's about a 28 minute episode, but I talked about when I went to college, the first thing I did when all those guys were giving out credit cards, I got a chase credit card for $500. It's back in the late eighties, early nineties. I got the card, I think on a Wednesday and that Friday I went down to center city, Philadelphia. I bought myself two new Adidas sweatsuits and Adidas top 10 sneakers, the high top Adidas sneakers.

[00:07:01] I spent about $250 on a $500 line of credit or credit card. And literally within several months, because I was only working work study and just making enough money to eat over the weekends and get my drink on and party. Uh, my, my credit went bad. The card defaulted and I started out with bad credit. All right. So once again, I didn't get educated on that.

[00:07:26] My parents didn't educate me on that, but the difference is, you know, once again, most people use credit to buy stuff. That was me and wealth builders use credit to create assets. So we're going to talk about several things today in reference to that. So let's talk about number one, why wealthy people think about credit differently. All right. Once again, the average consumer buys liabilities.

[00:07:52] If you are on Instagram, you're going to see it all day, every day. You got these simple Simons on there talking about how much they spent for this, how much they spent for that. Uh, you know, buying all types of designer products and services. And if you, if you got the money, that's fine, but don't be an idiot because what you don't understand is most wealthy people are looking for deals.

[00:08:19] You're looking to wear everything and put it on your back or on your feet or drive it when you can't even rub two nickels together. And you worrying about buying a pocketbook that you can't even put money in, right? You, you worrying about making sure your electric bill gets paid and you out here buying all this dumb stuff. I'm not going to call this boxers name out and it's not, it's not Floyd Mayweather. This is, you know, at Floyd Mayweather at the, you know, used to earn crazy money.

[00:08:47] You know, he might be coming back to fight Pacquiao or whatever. And I know he's got some lawsuits going on to recoup some money, but there's this boxer. I'm a big boxing fan was talking about, oh yeah, all I do is buy all these clothes. I got three rooms in my house full of clothes. I got this bag for $20,000. I got another one for 50. And I'm saying to myself, man, this is the dumbest thing I heard in my life. You have a finite amount of time to be in that boxing ring.

[00:09:14] And trust me, you ain't making that much money to be buying all of that dumb stuff. So once again, the wealthy think about credit differently. The average consumer buys liabilities, right? The successful entrepreneur buys assets. You know, you remember the movie Baby Boy when Ving Rhames was talking to Tyrese about guns and butter, right? We over here buying all that butter, all of that nonsense.

[00:09:40] Stuff that nobody really cares about because you want to look good. And I know there's a socioeconomic thing and I know there's history. So a lot of times, unfortunately, we want to show that we're wealthy when real wealthy people don't even have to do it because they already know that they're wealthy. You know, so that's one of the things they buy assets.

[00:10:02] And some of the examples of assets are businesses that could be equipment investment properties, like liability or luxury purchases and status purchases. All right. You know, that's putting in, you know, is this purchase and you got to ask yourself, is this purchase putting money into my pocket or taking money out of my pocket? Is it putting money in or taking out?

[00:10:25] You may look good, but after about a year, you're going to grow out of that, that dress or them pants that you just bought, you know, or those sneakers that you just bought and you're not going to wear them anymore. And guess what? It's wasted money. I can't stand seeing that.

[00:10:41] And I know it's a different generation out there, but if you took a lot of that money, that stupid money that you're throwing away for this nonsense and invested it in something, then you can start building wealth, not just for you, but for your family. Uh, there's an old saying, I don't know if I'm going to get it right, but you'll get the gist. You know, black folk plan for Friday or Saturday night, white folk be planning for three, five, 10 years down the line. And unfortunately, a lot of times that's the case.

[00:11:11] So we have to change that mentality. And today guys, we're talking about how, uh, how to use credit systems to build wealth. So let's talk about now about credit and opportunity, credit and opportunity. And this is something guys that, um, there's, there's an opportunity that you have when you have access to capital. Okay. So here's, here's some examples. If you're a business owner and you see some discounted inventory, guess what?

[00:11:40] If you have the access to capital, now you can capitalize and find discounted inventory. And what's that going to do? It's going to allow you to, to lower your cost of inventory and still make the seller for the same and make more money. Equipment sale. Somebody could be going out of business. You don't have access. You don't have any money because you, you leverage to the hilt. Access to capital to get your equipment. Investment properties. That's what everybody's trying to do. Uh, fix and flip. All right.

[00:12:09] You know, or buy and hold, but you're looking for something that is at a discount. All right. Something that you can take advantage of. All right. Now, and the, the big question is how fast can you move? And I'll give you a real life example on this. Uh, my, my, uh, wife's cousins that live in the DC area and anybody knows the DC area, that DMV area, man. Them houses go like, like, like crazy. And they're super expensive based on the location.

[00:12:38] So, um, her cousins ended up buying this house for 1.4 million. It was as is, but the reason that their offer got accepted was because they had cash. They had access to capital. They were able to move quickly and secure that property. And trust me, once they finished putting some work into it, that property is going to probably be worth a little over $2 million. Okay.

[00:13:04] Can you move, uh, quickly and opportunity guys, it loves preparation. So you have to be prepared for that opportunity. And the way you get prepared for that opportunity guys is having that foundational piece in place with your personal credit and your business credit. And we're talking about how to use the credit system to build wealth. This is what wealthy people do. Okay.

[00:13:29] Good credit doesn't create the opportunities guys, but good credit helps you capitalize on the opportunities. And that's what you need. Okay. To have that good credit. Uh, let's talk about how entrepreneurs use credit to grow their businesses. So in order to grow your business and leverage, you need to have options, right? You need options. So in order to have options, you need to have access to capital. Money makes the world go round.

[00:13:57] Now, yes, you can make deals and do things that don't require money, but the bottom line, guess what? Is the bottom line. So in terms of, uh, entrepreneurs using, uh, credit to build your business, you can buy inventory. You can use marketing campaigns. You can buy equipment, the expansion. You can hire people. You can have an emergency cashflow. Uh, all types of things that will allow you to grow and scale and leverage your business.

[00:14:23] Just think about how many opportunities that you have seen that you can't take advantage of because you don't have the access to capital. Now, once again, it's not necessarily all our fault because these aren't necessarily the discussions that we have around the dinner table or that our parents teach us. So many times if we come from humble beginnings, we're worrying about, or our family is worrying about just trying to keep the lights on and food on the table.

[00:14:50] So it's hard when your, your, your natural essentials aren't taken care of for you to think abundantly. You're just trying to survive. So there's a survival mode and then there's, there's an expansion mode and we need to start focusing on that expansion mode. Okay. So one of the things you have to understand too, guys, is the purpose of leverage is growth. It's not lifestyle inflation. It is growth.

[00:15:17] So when you have that access to capital, it's not to go out and buy dumb stuff. So remember when the PPP loans were going out and you had all of these nuts on online doing COVID talking about, you know, yeah, this is how you, you scam and get the PPP loans. And then these idiots would go out and buy houses, luxury cars and all of that. That's coming from a mindset of lack. That's coming from a mindset of inequity.

[00:15:45] That's coming from a poor mindset that says that I have to show people what I have to validate myself. It comes from a mindset of ignorance and ignorance, meaning not knowing, not being stupid, but ignorance, meaning not knowing. Okay. This ain't a lifestyle thing. It's leverage. It's leverage to grow your business. You know, borrowing for consumption, guys, keeps you stuck. All right.

[00:16:12] Borrowing strategically can accelerate your growth. I always say if you're, if it's not making you money, if you have access to a line of credit and whatever you, you do with that line of credit, however you use it, it should be something that helps you make money. I tell people this all the time when I do my consulting, my one-on-one coaching, you know, people always talk about tax returns. Take that money to make money, right? You can either do one or two things.

[00:16:41] Now, if you need to pay down debt, I get that. If you want to pay down debt, when you get a chunk, that's fine. Or you can take that money and you can start to use the money to make money. So if you're getting a $10,000 income tax refund, why don't you find a way as opposed to blowing it, either pay down some of your debt or whatever you need to do, but then take that money and try to create a vehicle or something that's going to make you money.

[00:17:09] Okay, because once you exhaust that money, guess what? You don't have that resource anymore. So do you want to take that money and create an asset that's going to siphon off money? Or do you want to blow the money and then it's gone and now you back at square one? So once again, using that leverage, guys. So borrowing for consumption keeps you stuck where if you borrow strategically, it can accelerate your growth.

[00:17:37] All right, let's talk about now, guys, creating your credit wealth blueprint. All right, so you want to have a couple of action steps and you're going to have about what? Six action steps. Action step number one, know where you stand. And I talked about this in the previous episode, number 625. What does your credit look like? What does your credit profile look like from a lender's perspective? I talked about positioning.

[00:18:04] How do you position yourself for lenders to say yes? Okay, about setting up your credit profile. And I did another episode about get funding ready. Are you is your business ready for funding? And so you have to understand how to position yourself. It's all about telling the story. So I am a mortgage broker. I have my own. I'm a broker owner. So I do residential and commercial loans. And I also do business funding.

[00:18:32] So I know how to position you for success when it comes to getting that money. Okay, so step number one, know where you stand. You don't know what you have to do until you understand where you are. Step number two, identify your weaknesses. So if you have a business or your personal credit, you don't have a lot of lines of credit. You don't need too many, but you don't want to have too few. So once again, I talked about credit mix.

[00:18:59] So on your personal credit, it looks better to a lender. If you have a mortgage, be it a credit card or two, a car loan or whatever. If you have a mortgage on your credit report, what that states to a lender, a mortgage in good standing. All right, let's get that right. What that shows to your lender is that, okay, this person is stable. They have something to lose. They have a home. Now, I'm not saying you put your home up as leverage, but when a lender looks at that

[00:19:27] you have a mortgage on your credit report that's paid on time consistently, they know that there's a level of stability there. And as it all boils down to risk, you are less risky. Okay, because you want to do whatever it takes to keep that home. Okay, so identify weaknesses. How are you looking on paper? How are you positioning yourself on paper? So you may look on paper bad because your credit utilization is high.

[00:19:56] You may have five credit cards with $20,000 lines of credit on each, and that's $100,000. And you may be showing that on each card, you're up to $9,000. So your credit utilization doesn't look good. Anything over 30% utilization is a negative. So identify your weaknesses and correct those. That's step two. Step three, I just kind of touched on it. Improve utilization. Improve your utilization.

[00:20:26] Anything over 30% utilization on any lines of credit or credit cards is a negative. You actually lose points. So you can have a $10,000 credit card. And throughout the month, you can charge up to say whatever, $7,000 or $8,000. But when the bill is due, pay it down under $3,000, which is 30% of $10,000. So I know with an American Express, I had the charge card. You charge it up.

[00:20:54] But at the end of the month, guess what? You got to pay it all down. Now, so what I want you guys to understand, credit cards are for people that have money and the ability to repay. A lot of times when you see yourself living off of credit cards, and I've done that when the collapse of 2008 came, I had a ton of credit cards, lines of credit. And when you start doing and living off of your credit cards for essential things that you normally don't spend on, that's when you know you're in trouble. All right.

[00:21:24] Now, what I do now a lot of times is I'll use my credit cards for daily stuff going to the supermarket gas just so I can build up the points. But I have the money to pay them down at the end of the month. Okay. So step three was improve utilization. Step one, know where you stand. You have to understand and know what your credit report or profile looks like. Number two was identify your weaknesses. Step three, we just talked about improve utilization. Step four, protect payment history.

[00:21:52] Payment history is a big key, guys. So you have to understand that you have to pay on time. One times 30. If you're 30 days plus late on a mortgage or any payment, that's called a one times 30. If you're, if you're, if you keep a rolling, that means you're 30 days late for three months in a row. That's called three, you know, three times 30. Okay. So we see that it's not good. All right. So you want to say, try to keep your payment history on track. Okay.

[00:22:23] Uh, step number five, monitor continuously. You want to monitor your credit report periodically. And I know, uh, their credit monitoring things out there. Matter of fact, uh, our new partner, one, two, three, four, my new credit score.com monitoring is, is available with that program to help restore your credit. So you want to monitor continuously. And step number six, precision, position yourself before you need the funding. I always tell people this.

[00:22:52] They ask me, when's the best time to start my business? And I always tell them why you got a job. Okay. And the reason being is that means you're not going to be as pressed. Same thing here. Position yourself before you need funding. Don't wait until, you know, you're, you're stuck in a jam and you're going to try to get funding because guess what? If your credit profile isn't, uh, doesn't look good, you may end up getting a loan or access

[00:23:19] the capital that can be a detriment to you in the long run. The terms may not be right. Okay. So the best time to improve your credit guys is literally before you need it. Best time to improve your credit is before you need it. Um, let's talk real quick about building a financial system. Most entrepreneurs fail because they rely on motivation. Well, I, it's not even motivation is actually inspiration. Nobody can motivate you.

[00:23:48] That is something that is ingrained or self-taught inspiration. You can be inspired. So you see all these gurus out there, you know, they call themselves motivational speakers, but literally they're, they're inspiring you. Motivation comes from within. I can't motivate you to do a damn thing. You have to be motivated yourself to do it. All right. So, um, building a financial system. Most entrepreneurs fail because they rely on motivation. They don't build systems.

[00:24:16] So you want to have a business system, a marketing system, sales system, financial systems. Credit should be part of your financial operating system. Okay. Understanding where you stand credit wise, you know, so you need to have a system to do that. If you don't guess what you're in trouble. So you need to have business systems, you know, sales system, uh, a follow-up system and a referral

[00:24:45] system are the three first systems that you need. You need to have a quantified sales, qualified sales every month. You need to have a, uh, fulfillment, excuse me, sales system, fulfillment system, and referral system. So you need to have a sales systems that's going to generate, you know, a specific amount of leads per month. You need to going to have to have a fulfillment system to fulfill those leads. And then you're going to need a referral system.

[00:25:10] And right behind that guys is you're going to need a system to make sure that your credit is in order. All right. So your credit should be part of your financial operating system. There's key performance indicators that you want to check. I'm not telling you to check your credit every day. You don't need to do that, but periodically every couple of months, every three months, make sure you check your personal and business credit to make sure everything is online.

[00:25:37] Also, um, you want to have, uh, systems, but an integration. Okay. So when it comes to your credit, I talked about one, two, three, four, my new credit score. And I'm, I'm, I'm raving about them guys, because I've used it for my clients and it works. So it's a DIY approach. It's an educational first, it has monitoring action plans and it's entrepreneur focus. So it's a financial awareness tool for entrepreneurs.

[00:26:06] You don't have to use this system, but you need to use a system that's similar to this. So you'll understand guys that this is exactly why you need credit should be part of your financial operating system because it's, it positions you for access to capital positions you for leverage. It positions you to grow and scale your business.

[00:26:31] Now, before I get to the last segment, guys, let me just share my social media contact information and resource links. I mentioned, uh, one, two, three, four, my new credit score.com. Check it out. Uh, it's a great website. It's a great app. Check it out for yourself and learn more. Now, anything long family. If you want to connect with me, hit me on my email. Jay Jones at black entrepreneur blueprint.com. J A Y J O N E S at black entrepreneur blueprint.com.

[00:27:02] Excuse me. Uh, Facebook black entrepreneur blueprint.com. Uh, Instagram. I have two IG accounts. The first one is Jay Jones for real. J A Y J O N E S the number four R E A L. Second one is black entrepreneur blueprint. LinkedIn connect with me there. Type in Jay Jones, black entrepreneur blueprint, uh, Twitter or X, uh, Jay Jones zero zero one. J A Y J O N E S zero zero one. And also YouTube.

[00:27:31] Make sure you subscribe to the YouTube channel. We have additional content on YouTube that is not on the show. Go to YouTube. Type in black entrepreneur blueprint. Also for all you first time listeners or watchers, please, wherever you're watching this or listening to this, hit that subscribe button. We have, uh, we want to make sure that you know when the new episodes drop, we drop on all your major podcast platforms and YouTube every Monday morning, 5 a.m. Eastern standard time.

[00:28:00] So make sure you hit that subscribe button. Now let's get back to the last segment of the show. So today was part two of our access to capital series. So today we talked about how to use the credit system to build wealth, which is super important. And for us specifically guys, it's about knowing how to position ourselves to get the access to capital. Look, we always already know that we're behind the eight ball.

[00:28:28] The deck is stacked against us and they don't want us to have that access. So the only way to get the access guys is you have to understand the rules of the game. If you don't know the rules of the game, how are you going to win the game? So I'm trying to let you guys know what the rules of the game are to have access to capital because guess what? Yes. There are people that are blocking the way, but the bottom line for most companies is the bottom line.

[00:28:56] If you are a lender friendly, if you're positioning yourself correctly, trust me, they want to give out the money. And the reason being is guess what? They're going to make money off of you. So positioning yourself to be a lender friendly, and it's all about the perspective of the lender. It doesn't matter what you think or whatever. There's rules to this. There's parameters to this. And that's what we have to understand.

[00:29:24] And once we know that, remember when we get the access to capital, you want to use it to build, grow, scale, and leverage your business, not buying dumb stuff. Okay. Not buying. Oh, you got a hundred thousand dollar line of credit. Let me go in and buy something stupid. That's a liability as opposed to an asset. Always take money to make money. If it's not putting money in your pocket or help building equity, then don't necessarily

[00:29:53] use that money for something else. Okay. I talked earlier about the tax returns. People usually treat themselves with all types of stuff with the tax returns. Get it. Been there, done that. But if you can take that tax return or any lump sum that you get and use it to make money, that's just better. So I used to tell my wife years ago all the time. So with our tax return, how about if I invested in this business or I do something instead of

[00:30:20] just getting a $5,000 tax return and ended up blowing it or doing something, how about we take it and invest it in a business? And even if the business spins off only $300 a month within 18 months, that $5,000 is going to be making us money. You know, another thing I talk about, if you want a new car, right? And I tell, I just told my cousin this, she's in a business consultant and she needs my help with some stuff.

[00:30:49] I said, you know, I spend off little micro businesses to pay for specific things. So if I want a new car, right? I'll try to spend off a little business that may make me $700,000, $800,000 a month. And that money is geared specifically just for that car note. So, um, yeah, these are the things that we have to do guys. And it's all based on understanding the rules and knowing how to play the game.

[00:31:14] And if you're listening to this, I'm asking you go back to listen to 625. That's part one, episode 625 and 626. Share these episodes with your network because it's paramount for us guys to be able to understand how we can grow and scale the business. That's what Black Entrepreneur Blueprint is all about. Launch, build and grow. And it's not, you know, just for me.

[00:31:39] It's about sharing what we all know, the access that we do have, the information that we do have and the actionable steps to move you guys from point A to point B. All right. So please share this information. Share these links with, you know, your cohorts, anybody, because this is good for even if you're not an entrepreneur, people still need to get their credit in order. Personal credit, obviously. And if you're an entrepreneur, your personal and business credit. Okay.

[00:32:08] Now I say this each and every week because it is true. We get more and more downloads because of you, the BEB family. I appreciate you guys so much. Remember, we have all types of resources here. It's about elevating your entrepreneur IQ. It's not about me. It's not about you. It's about us. It's about building an economic power base in the worldwide black community by building and supporting black owned businesses. Love you guys. See you same time next week. Peace.