Home Radio Segments Real Estate Round-up Surprise! Maybe Your Credit Score Isn’t As Important As You Think

Surprise! Maybe Your Credit Score Isn’t As Important As You Think

Terry Story, Credit Score

With Terry Story, a 30-year veteran with Keller Williams located in Boca Raton, FL

Terry Story joined us once again for our always enjoyable look at what’s going on in the housing market. And the headline news was undoubtedly the fact that mortgage rates are steadily ticking downwards, having reached an average of around 4.4%. This is clearly good news for new buyers looking to borrow and, in many cases, homeowners with existing mortgages.

Market Activity

Terry indeed confirmed that this gradual reduction in mortgage rates had seen the market pick up and that activity in the housing market is currently very strong. This could be good news for sellers as well, as it means more people are on the lookout for properties, due to the preferential market conditions.

Tenancy Issues

Steve and Terry then had an informative discussion on the rights and responsibilities of tenants. While the theory behind tenancy is that you “step in the owners’ shoes,” the reality doesn’t always match this expectation.

For example, issues such as pets can be a massive problem for tenants, particularly if a tenancy is agreed without both parties realizing that it’s an issue. This then leaves the tenant in breach of the tenancy, yet having to make a difficult decision about a valued pet, which can often be very much part of their family.

But it’s not only pets that can cause problems. Steve and Terry also discussed some lesser known issues that can crop up in relation to tenanted properties, such as pick-up trucks and motorcycles on the property. The bottom line here is to make sure you’re aware of all of the terms of your tenancy long before you move in.

Credit Scores

Finally, Steve and Terry went on to a discussion of credit scores, particularly the issue of dormant accounts. Steve noted that there is something of a conflict here. On the one hand, “experts” often say that you shouldn’t close down credit accounts blithely, as this will hurt your credit score. Having dormant accounts can be detrimental to you, and although you might take a short-term hit for closing them, in the longer term, it will count in your favor.

So the advice here was to take a long-term view and build a credit portfolio that indicates sustained financial good health. And also to bear in mind that credit scores are only important in certain rare circumstances. When you don’t need them, they cease to matter at all! So don’t worry too much about your credit score going up and down a little, unless you intend to make a major financial commitment, such as buying a home.

All in all, it was another illuminating chat with Terry, and no doubt there will be a whole host of new housing issues to discuss next week.

Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital.  Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.  Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances.  The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.

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Steve Pomeranz: It’s time for Real Estate Roundup. This is the time every single week we get together with noted real estate agent Terry Story. Terry’s a 30-year veteran with Keller Williams, located in Boca Raton, Florida. Welcome back to the show, Terry.

Terry Story: Thanks for having me, Steve.

Steve Pomeranz: So we have seen a downtick in mortgage rates.

Terry Story: Yep.

Steve Pomeranz: As a matter of fact, for most of 2018, they hovered around 5%, and now they’re hovering in kind of the below four and a half percent range, around 4.4.

Terry Story: Okay, yeah.

Steve Pomeranz: Are you seeing any difference in the volume of people looking and selling and buying?

Terry Story: I can tell you right now, from what I see, the activity is very strong. The buyers are out there. I think it has to do with the fact that the interest rate, it did bump up there for a little bit. And it came back down. So there’s always a pent up supply of either buyers or sellers. I think the pent up supply of buyers has noticed that the rates have come back down. They’ve also noticing there’s a little bit of increase in inventory. So it gives them a little bit more shopping opportunity.

Steve Pomeranz: It’s a good thing.

Terry Story: Which is a good thing, very healthy for our real estate market. And that’s what we as realtors all have been waiting for, rates to come down and inventory to rise. So it’s active, it’s very, very active. Getting multiple offers on-

Steve Pomeranz: Again.

Terry Story: On median-priced homes.

Steve Pomeranz: Oh, that’s good.

Terry Story: Yes.

Steve Pomeranz: Well, when we had talked about…and I don’t remember the exact statistics…but we had said that for every X drop in interest rates or rise in interest rates, that either shuts a certain amount of people out of the market because rates have risen. And now their mortgage payments are too high relative to their income, or the reverse when rates go down, now they can’t afford more home, and that again, creates more demand.

Terry Story: That’s right.

Steve Pomeranz: No, it’s very good.

Terry Story: That’s right, so all good.

Steve Pomeranz: Okay, so we are seeing that.

Terry Story: We are seeing it.

Steve Pomeranz: Okay, well, that’s excellent. All right, so I want to switch gears here. Your real estate survival guide, where we go to other areas of the real estate market. And I thought this one was pretty interesting. Here’s the question.

Terry Story: Sure.

Steve Pomeranz: It is my understanding that tenants step into the owners’ shoes and are allowed the same rights as owners except for voting. It’s an interesting way to put it, stepping into the owners’ shoes.

Terry Story: Yep.

Steve Pomeranz: The questioner asks, is that correct? I’m having an issue with the homeowner’s association where I’m renting where they won’t allow me to have a pet,  but they will allow owners to have pets. Does the association have the right to prohibit tenants from having pets and not owners? If so, are there any other rights that a homeowner’s association can restrict for tenants?

Terry Story: Excellent question, and this is something we do see. An association is allowed to enforce the provisions of the governing documents as long as the provisions are not discriminatory, right?

Steve Pomeranz: Sure.

Terry Story: So the differences between an owner and a tenant’s rights are usually contained in those governed documents. So in practicality, yes, this is very common, and I don’t know even if a lot of realtors realize. So if you’ve got a client looking for a rental, and it says pets are allowed, or you’re familiar with a community that does allow pets, don’t necessarily assume that that right is granted to the tenants.

Steve Pomeranz: Yeah, that’s a big one.

Terry Story: And it is a big one. And then you find out later that they’re not accepted as tenants because they have a pet, so. And this very common.

Steve Pomeranz: Well, I know, but you can think about, you don’t know this, the realtor doesn’t know it. You go in, you move in with your pet [LAUGH] and-

Terry Story: Well, you’ll never make it past moving in with a pet because you have to get approved. And so when you write down on your application you have a pet, that’s usually when it gets discovered.

Steve Pomeranz: Yeah, I mean, I can just see you there now. What are you going to do? Are you gonna have to get rid of your pet or-

Terry Story: Right.

Steve Pomeranz: What a mess, right.

Terry Story: I had something like that and it had to do with pickups.

Steve Pomeranz: What is that, oh, pickups.

Terry Story: Pickup trucks.

Steve Pomeranz: Oh, pickup trucks.

Terry Story: And okay, I admit I did not know the rule.

Steve Pomeranz: Oh, yeah.

Terry Story: It was a big problem.

Steve Pomeranz: And you’re already in the neighborhood, you already lived there.

Terry Story: We had the tenant move in, and I don’t think we had to fill out an application. I don’t remember all the details, but the bottom line is the tenant had a pickup and we weren’t aware of it.

Steve Pomeranz: Oh.

Terry Story: So whether or not you’re aware of it, if it’s a homeowner’s association because you don’t necessarily have to be given the HOA documents. But as a tenant or as a realtor or as a landlord or anybody listening to this radio show, please look at the HOA documents and know what the rules are before you rent the property out because you may not own a pickup, and you may say, oh, pickups are allowed.

Steve Pomeranz: Yeah.

Terry Story: And then discover that A, they’re not allowed. You didn’t know that they weren’t allowed, so-

Steve Pomeranz: Right, and so the day, move-in day-

Terry Story: Move-in day, even motorcycles, I’ve had that happen with motorcycles.

Steve Pomeranz: Yeah.

Terry Story: Motorcycles and pickups are bad, [LAUGH], I don’t know why. [LAUGH] Car discrimination, bike discrimination.

Steve Pomeranz: I don’t know, well, first of all, motorcycles can be incredibly noisy, nobody wants that. Pickup trucks, I don’t know. You’re working on, how about cars in the back yard and stuff like that.

Terry Story: Now, now.

Steve Pomeranz: It lends a certain-

Terry Story: My family owns pickups, including myself, it’s a nice one. It’s the most expensive car we own, actually.

Steve Pomeranz: I am actually going to stop talking about it right now, [LAUGH] so.

Terry Story: Those things are $70,000, did you know that?

Steve Pomeranz: Oh, well, I know, I know. I forget who it was, Chrysler or somebody, no, Chrysler.

Terry Story: Ford.

Steve Pomeranz: Ford.

Terry Story: Dodge.

Steve Pomeranz: Ram, right, yeah, they just came out with a seven-foot pickup truck now. They’re getting [LAUGH] ridiculous. All right, so, this next piece here is not from me, it’s from a person by the name of Peter Dunn. He’s an author, speaker, and radio host. And these are not necessarily the thoughts of Terry or myself, but I like what was written here and I thought there was some good information, so I’m going to go ahead and try the summarized version. So the question that was posed to him was someone said they were currently purchasing a house and noticed on their credit, that their credit report, their credit score was 807.

Well, one of the items that was hurting the score was the length of the accounts that were open. This person said, I have Lowe’s, Home Depot, Discover cards with all zero balances. Should I close them? If so, all at once? Or should I filter them over a course of time, and I’ve always liked having them just in case. But I don’t use them very often, if at all. And asked Peter his thoughts. And I will say that I’ve interviewed lots of credit experts, and they say keep your credit cards open because every time you shut your cards, even whether you’re using them or not, it hurts your score.

Well, Peter Dunn doesn’t agree with us, so his answer is, you’ve been bamboozled, tricked, hoodwinked, we all have. Collectively, we’ve decided we’re going to let an otherwise meaningless score mean a lot to us. In the process, we’ve made decisions that make no sense whatsoever and in turn damaged the meaningful signs of financial stability. And it’s not your fault, he goes on to say. But if you’ll let me, he wants to take a moment to explain this. You have a score of 807, he says. He says that’s enough, it’s fine, stop. Despite popular belief, the goal isn’t to have a perfect score. He hears that all the time. I have perfect credit, someone will say to him and to elicit some kind of a figurative cookie.

Terry Story: Right.

Steve Pomeranz: [LAUGH] Like you’re gonna give him a cookie. [LAUGH] Good for you.

Terry Story: A trophy.

Steve Pomeranz: You’ll pat him on the head. Good for you, you got a perfect score. But it takes every ounce of restraint for him not to scream back, who cares? It doesn’t matter. See, your credit score is no longer a measure of your financial health. More than anything, it’s used to gamify your involvement in the selling of your data. The credit bureaus, or data bureaus as I prefer to call them, sell what they call your, quote, decision analytics, end quote, to companies who want to sell you things and want to know exactly how you think. Every time you swipe a card, dozens of data points are captured about your transactions, and then those are aggregated over time. They know how much junk food you eat. They know, [LAUGH] and you can’t get away from that. If you’re buying Ding Dongs every other Thursday [LAUGH] at 8:57 in the morning, they know that.

So he goes on to say, this is real, it’s not science fiction. He mentions a book, Mark Goodman’s Future Crimes: Inside the Digital Underground and the Battle for our Connected World. And he says, look, the bottom line is close your credit cards if you don’t use them. Your credit score will go down temporarily, but it will come back up and get off it, okay?

Terry Story: Yep.

Steve Pomeranz: An 800 score is terrific. And anyway, how many times are you going to buy a house? How many times do you actually need to use this credit score?

Terry Story: That’s right.

Steve Pomeranz: That was the answer, and unfortunately, I took us to being out of time. So Terry, thank you for your patience. And as always, talking to Terry Story, 30-year veteran with Keller Williams located in Boca who can be found at terrystory.com.  Thanks, Terry.

Terry Story: Thanks for having me, Steve.