Access to credit is something that is earned by being responsible throughout your life. I manage my credit like I manage my assets. With that being said, it is not unusual for me to have a few hundred thousand on the personal LOCs and credit cards. The key is to use the credit to expand wealth and not to increase your spending on frivolous things.
Over the past few years, I have used the credit to:
1) While walking down the street we noticed that there was a house for sale by owner. Great view, tiny little mustachian house, great location and lot. I checked our savings account and noticed that we had about $3,000 in the account. That was not going to do it. Pulled out the Visa, LOC, and HELOC and put the $89,000 down payment on that, locked in the rest at 3.875% for 30 years. Put $10k of updates on the VISA and now we have a great rental. We were contemplating buying the same house across the street from the owner a year later, but the house is now listed for $125,000 more than we paid. That is probably high, but we have around $80-$100k in equity within 12 months.
2) A few years ago, very responsible sister, was going through some tough times. She was moving out of her large house and buying a mustachian house. She needed $50k and was willing to pay me 10%. I took an 18 month 0% for a 3% fee. Lent her the money, told her no interest as I wanted to support her. Within a year I open the mail and a cashier's check for $55k was there. I tried to give back the interest, but she would not take it. $3,500 profit.
3) Two years ago, one of my side gigs was helping friends start a business. The help I provided was finding them financing for a $8m project. They invested $1.3m in the project. In the final hour the bank added another roadblock in requirement for a bridge loan of $300k until the building was completed. I put in $60k at 18%, received $150k of ownership, and have had fun watching it grow. Ownership was based on other help but made $18k in arbitrage. Also, only invested as I knew in detail the project and the profitability of the operations.
4) Another was a business that I helped a friend start and build 10 years ago, unfortunately it became available with his passing. I wanted to help his sons, so I bought in 10% for $30k. My ownership kicks off $20k-$40k a year. This is probably not a hugely profitable venture as it entails managing the two adult sons, but they are like family to me. They would most likely bankrupt the business, so I feel that I am doing well for him and have great hope that the sons will be hugely successful in their lives soon.
5) Other deals and opportunities throughout the years pop up a few times per year. I really can't recall one where I have been burned, but I am very conservative in my investing. Maybe paying for things with debt, actually forces stronger due diligence.
6) Also pure debt arbitrage can be pure money, but having access to capital is where the large wins pop up.
I don't like keeping more than $3kish in the checking as it pays .5% or something. Mostly, I keep $0 with an auto draw on my LOC. When I get paid, I put 100% on the LOC which costs 7% if I am using my personal LOC or 4.24% if I am on my HELOC. I rarely keep a balance on the personal LOC unless a deal pops up. Then I focus on paying it off. At any given time I have access to $300k- $400k in credit. My credit score is in the high 700's and sometimes low 800's. If I have $50k on CC, but have $600k in lines then I am showing 8% utilization, win capacity or access to credit of $550k, etc. My accounts are old, I usually only open a new account CC if they will give me $50k, I pay all bills on time, actually pay off most debt throughout the year, I have spikes when I make larger purchase. Even then credit is in the 730's. As the old saying goes... I actively increase my credit when I don't need it. This is when my credit is at its lowest, score the highest, etc.
Debt is a powerful weapon in building wealth. I only buy what I can afford to pay off with other investments if everything hits the fan. Protect and use your debt like you would your assets. Have fun! Keep your eyes out for deals and they will pop up.
P.S. Added bonus, wife sees $0 in the bank, so she is less likely to spend money. Also, having as much on credit at times keeps her focused on paying off debt and not buying trinkets. She is more frugal than me, so we are all good there.
