A couple weeks back, we gave a quick seminar/overview of what’s needed when you decide you want to proceed with purchasing a rental unit.

We always start with the basics and hope people ask questions to direct the conversation.

I also had the privilege of presenting to my BNI group the following week. Same basic information.

The result? Almost always the same. No one really understands how the whole credit system works or what their credit score means.

It’s not surprising really. Who is going to teach them about it? Their parents (go to school, get good grades, get a good job, buy a house, pay off the mortgage, retire…)?

We live in a new generation. I’ll call it the credit generation. A whole generation that has treated credit as though it was “their” money and how dare the credit card company charge them for using “their own” money? Prior to this, credit was a thing you used to buy a home or a car or some similar large item. Credit cards were not always that easy to get and the idea of carrying a balance? Forget it.

Skip ahead a generation and plastic is everywhere. Anyone can get it poor credit or good. What I love is the folks who get mail, just after they have come out of bankruptcy, stating, apply for credit now. You can have up to $10,000 at a low introductory rate of 2.99%. These folks aren’t getting approved. “But they sent it to us directly in the mail.” These folks are also not familiar with the concept of mass marketing either.

They apply and get rejected. Another piece of mail comes in. They apply and get rejected. And so on and so on. I have one comment for these people “PLEASE STOP APPLYING” or “PLEASE PULL YOUR OWN CREDIT RATING”.
You would think that after applying and being rejected you would want to know why. In case of the bankruptcy it’s fairly obvious, but most people just carry on. Maybe they’ll approve me next time.

I had one situation  where a gentleman was trying to get himself out of a “bad” car lease. I have to give the guy credit (so to speak), he tried very hard for 12 months to get out of the lease. At least once per month. For those following along at home, you can stop laughing now. He didn’t see the humour when I explained that every time he made an attempt to change leasing companies, each company pulled his credit rating. He was not about to get a better deal anytime soon. He had no idea they were doing this and was not happy to hear what kind of rate I had to give him based on his score.

I suggested a few remedies to fix his credit, as he had no other problems with his credit, and come back in a few months and we’ll try again to get him a mortgage.

No fewer than 18 hits in 12 months. Doesn’t affect your credit much you say? From what I would have said should have been in the 700 score, he was sitting in the high 500′s. OUCH!

In the credit world they “term” this a credit seeker. The credit world frowns (heavily) on credit seekers.

To learn more about credit scores, see some of my previous blog postings. Fixing it can be simple and easy and can be a reasonable score in 6 months.

A quick summary, pay early, pay often and most importantly, pay regularly. Do you have credit? Do you use it? Do you manage it well? That’s what the score shows.  It’s not rocket science folks.

I’ve always heard or read this in the paper.

“Economists Disagree”. The last two weeks have seen a sudden rise in the posted rates and in the discounted rates. This seems to contradict what the economist was telling us just a few short weeks ago.

There are 3 factors, he says, that you need to watch in order to determine if rates are going up. He’s still maintaining the same line, which is good otherwise he’d have no credibility, but he has no real plausible explanation for the “short-term” rise in rates. He says its the influence of the US economy. The housing market there is almost at a standstill. The Canadian market by contrast is having a record first half.

Inflation is up, which has the central bank worried. Something tells me they are a little more worried if they raise rates too soon and cause the economy to switch quickly into a recession. The pressure is on, however. The dollar continues to rise, which hurts manufacturing which ultimately leads to inflation (a trailing indicator).

As a result all the lenders are anticipating a rate increase and have adjusted their rates accordingly. I think they have over-adjusted as I can’t see the central bank raising prime by more than 0.10 – 0.20%. Yet the banks have increased by a full 0.5% in anticipation.

The other prediction I heard this week was that it is expected that the dollar will rise to be on par with the US by year end.  That coupled with the Federal Reserve expected to lower rates to stimulate the real estate market, makes you wonder what’s going to happen in the coming months. Has Canada insulated itself enough from the US to not have to follow suit and drop rates, given the world economy is alive and healthy and apparently NOT linked to the US economy. This will be a first in some 50+ years.

The bond rates continue to rise. This is an indication that foreign investors are taking their money out of Canada as it is seen as “risky”. Normally everyone gets nervous when the bond yields rise by more than 0.1. Well they’re up almost a full 0.5% in the last month or so. What does this mean?

I can’t wait until this “interesting time” is over and the economist figure out what they think happened and then we can get back to having disagreeing economists.

“May you live in interesting times.” I’m sure economists hate this Chinese curse. They probably understand it too well.