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Color of Money

Color of Money

Personal Finance

Michelle Singletary
Washington Post Business Columnist
Wednesday, October 13, 2004; 2:30 PM

Need financial help? Need advice about your credit report? How can you live a frugal lifestyle?

Post columnist Michelle Singletary will be online Wednesday, Oct. 13, at 2:30 p.m. ET offers advice on how to manage your personal finances.

_____Michelle's Column_____
The Color of Money

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

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Michelle Singletary: I'm here. Let's get started.

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Upland, Calif.: Is it legal for someone to look at my credit report without my permission? Do inquiries hurt my report?

Michelle Singletary: Well, it's legal for companies to look at your credit report to make a preapproved offer for a credit card for example. However, a car dealer or employer can't just pull up your credit report without your permission. And you want to be very careful about giving businesses that permission. Inquiries on your credit report can have the potential to lower your credit score. But if you pull your credit report it does not hurt your credit score. If you have any other questions go to www.myfico.com

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Washington, D.C.: I am fortunate to have a high paying consultant job. I'm a 1099 and get $65 an hour (comes to about $130,000). I'm paying my quarterly, but at last year's salary rate (85,000) plus 10%. The IRS said this is not a violation. What kind of tax hit will I get come April 15? I've been saving as much money as I can (almost $40,000!).

Michelle Singletary: Whew. This is not my territory. You should consult a tax expert just to make sure you file and pay taxes when you should.

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Washington, D.C.: Michelle I went from a pennypincher to a spendthrift all in the course of six months!! I dunno what happened, but one day I got tired of counting my money and just spent it. Now I have $3500 in credit card debt (no I can't put my hand on one thing that I bought with that money) and no savings. PLEASE DO AN INTERVENTION AND HELP ME!

Michelle Singletary: Well, it's really hard to do a proper intervention online but I would say from your question that you have seen the light. Look sometimes even penny pinchers can get crazy and spend too much. The test is can you stop it now that you know it's crazy. For some having $3,500 on a credit card may not be much but it can quickly get out of hand. So PUT THE CREDIT CARD AWAY until you pay off the card.

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Chicago, Ill.: Hello Michelle,

I hope things are well with you and yours.

My problem is that I am VERY frugal. I save and save and save. I am getting older and now realize that I need to start enjoying some of my money. My problem is that I just cant spend. I have conditioned myself to be a saver and even things I "need" I usually talk myself out of getting. How does a life long saver, who has the means, make the transition to a spender(Not a BIG one but maybe a medium one).

Thanks

Michelle Singletary: One penny at a time (hee, hee). Serously, I'm like you. I hate to spend money. My husband has to constantly remind me that we are saving for a purpose -- to eventually spend some of the money. Can I tell you a quick story?

I'm helping an elderly aunt out right now. She's my grandmother's sister. She saved all her life. And I mean really saved. But she took it to heart so much that now she can't and won't spend the money even for things that could make her life better. She's lonely and frankly I think sometimes her money is her God. Don't end up like that. You can be a prudent penny pincher and have fun too. I mean I do have cable. I eat out. I also save like crazy.

Remember YOU CAN'T TAKE IT WITH YOU.

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Washington, D.C.: Michelle, Please help, help, HELP!!!! My FICO score is 650. I went through a rough patch a few years ago due to a divorce and again last year where I was late on bills. I'm doing better financially and I've resolved to pay off the bills on time and have been doing so for the last year. Here's the issue: My biggest credit card balance is $8400 on a credit limit of $9500 and am making more than the required minimum. However, the interest is 27%! I have a few other cards but the interest rate (though higher than 15%) is manageable and am making more than the minimum payment on those also. I have called the credit card co (the one with the 27% interest rate) and have asked them for a lower rate and they keep telling me to make my payments on time and to call them back in a few months. Well, I want to give my money to someone but not to them! I'm aware that with my previous credit problems, I don't qualify for a 0% balance transfer rate but anything less than 20% at this point would help. However, I get those credit card offers and I don't want to reply to a bunch of those to find out that I only qualify for a $300 credit limit which is not going to help me and that will show up on my credit report as inquiries.
So Michelle, tell me what to do? I'd like to find a bank/credit card co. that will look at my good salary and my willingness to pay off my bills and on time and will transfer my balance to their card and will still get some interest out of me but not the 27% that the other company is charging me. This has become so stressful. I see every month more than $200 of my payment go to the interest, it makes me sick. And I don't own a home so refinancing is out of the question. Thanks for any advice.

Michelle Singletary: Ok this might sound harsh (cuz you can't see my smiling face) but take a credit chill pill. Your FICO score only matters if you are going to apply for more credit -- such as a home loan or car loan. Stop worrying. Stop beating yourself up. You are right about trying to switch around debt if you are still making late payments. You probably won't qualify for the best rate and it might end up hurting your score more. So, let's attack this problem another way. Have you really looked at your budget and found all the money you can to aggressively pay down the debt? If so and the more than minimum payments you are making is all you can do -- then it's all you can do. Keep doing it until the debt is gone. I know it's hard to stomach the high interest rate but as you note paying late is a big reason why your rates jumped. So concentrate on paying as much as you can on paying that amount every month on time.

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Crystal City, Va.: Hi Michelle!; I have made a terrible mistake of borrowing money from one of those loan places. Problem is, I have to keep going back to make ends meet. How can I get out of this mess? I need a loan just to get out of a loan. Should I do Debt Consolidating? HELP!;

Michelle Singletary: I think you definitely should talk to a debt counselor to help you budget better. And you do need to get out of that loan trap. Is there anyone (friend, family member) who could help you out and won't charge you interest? If not, you really need to cut every possible expense you can to find the extra money to pay off the loan. For debt help go to www.debtadvice.org.

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Washington, D.C.: Hi Michelle -

I remember reading somewhere that when you authorize a lendor to access your credit report (say in the case of a mortgage application) there is a certain window of time where three enquiries will be treated as one - a week or two. Is this accurate or am I totally making this up?

Thanks

Michelle Singletary: Nope. You are not making that up. You are right. Fair Isaac, the creator of the FICO scoring model, finally came to its senses and realized it wasn't fair to penalize people for shopping around for a good mortage or car loan rate. So now you have - I think it is 30 days -- to shop around for a mortgage or car loan so that multiple inquiries won't ding your credit score.

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Springfield, Illinois: I have requested that a creditor (Sprint cellular service) report my excellent history with the credit reporting agency that they checked prior to opening my account. They have not done so. Do I have options to get my credit history with them documented so that if benefits me? I'm sure that if it was a poor history, they would be quick to report it.

Michelle Singletary: Sorry, it's unfair, but a creditor is not under any obligation to report your good or bad credit history to the credit bureaus. I think they should since they certainly are more than happy to threaten to report you if you don't pay your bills on time.

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Bethesda, MD: How does one strike a balance between being diligent about sticking to one's budget and not getting neurotic about it? I have been tracking all receipts for a couple of months now and it is driving me nuts. It leaves me panicked when I am over in a category (despite the fact I have $0 debt and decent savings)

Michelle Singletary: I hear you. But read my message to the other saver. Really, watching my aunt has "almost" cured me of being so worried about going over my budget. With all her money and financial security, she's still unhappy and STILL worried about money. It's just money. You should definitely keep track of your budget but don't beat yourself up if you go over in a certain category. Just resolve to spend a little less in the next quarter or year.

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Washington D.C.: Hi Michelle-

My boyfriend and I have been living together for 7 years now. Our finances have been mixed since the beginning (both savings and checking). We have different views on saving and spending. He is a 'gone with the wind' type of person who does not think about saving or planning for the future. I have been described as an overly serious person and I want to plan to get a home of our own, save up funds for an emergency and the like. I think that it would best for us to keep our joint checking account for household expenses but get seperate savings accounts. This way he can spend 'like the wind' and I can save, save, save. What is your suggestion as to how couples should balance their money? Oh by the way, we are not married as of yet.

Signed,
Unbalanced Check Book

Michelle Singletary: Ok my faithful readers and chat guest, you know where I'm going on this one, don't you. My advice is to get married or get a roommate but don't shack up with your boyfriend/girlfriend and if you do don't mix your money. Now I'm not judging you. That's the man upstairs job. I'm just saying I've seen a lot (and I mean a lot) of couples do this and regret it. Now about the different saving and spending styles. Many couples have this issue and never really address it. Leave it alone and it can cause serious problems. But when you do get married there are compromises you can make so that your boyfriend can spend some money recklessly and you can save in piece. It's called a budget. And within that budget you both can allot yourself a set amt. of money that can be spent anyway you like no questions asked (or eye rolling).

And what do you mean not married "yet." Are you just test driving the man :)

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washington, dc: I'm engaged. I know that many couples fight about money. Do you have any advice on how to prepare ourselves so that my fiancee and I don't end up fighting about money?

Michelle Singletary: Make sure you have good, long and honest discussions about your finances. And I mean really honest. Figure out how you each handle money and discuss that. Is one of your a spender and the other a spendthrift? If so how do you plan to handle that? Do you plan on having separate or joint accounts (I say joint). Really, I would suggest you find a premarital class that has a good section on finances and take it. A lot of couples have found out a lot about each other by going thu counseling befor they get married.

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Anytown, USA: Hi Michelle. I love your chats, column, and refreshingly honest attitude!;

Quickly, my new spouse and I are ready to buy our first home. The only thing stopping us is a very damaging, ERRONEOUS listing on my spouse's credit report. In a nutshell, my father-in-law accidentally answered a credit card offer received in the mail and subsequently took out a credit card in my husband's name a decade ago (they have the same first name). My spouse didn't even know this card existed until about a year ago when we checked his credit report to make sure things were accurate as we prepared to buy a home.

Long story short, we have done everything we know to do to get this card removed from my spouse's credit report. For the past three months, we have been waiting on the credit card company to answer a signed, notarized letter written by both my spouse and father-in-law with my father-in-law taking responsibility for this card (though his payments on it over the last decade are not impressive). The credit card company has missed its own deadline to review this case and get back to us, and will not answer my husband's calls.

We could probably be pre-qualified for a home loan with the erroneous listing, but our broker thinks we should wait until the credit card listing comes off the credit report. I am losing faith that will happen since the credit card company won't answer the "challenge" letter (they said it would take a month to review). Do you see anything we could/should be doing? It's a maddening and helpless feeling!;

Michelle Singletary: Well, you may eventually have to ignore the broker's advice. But it could be that the one piece of information won't hurt your chances of getting a good home loan however you won't know that until you apply. So apply and in the process make copies of everything to show the potential lender. These days they are aware that such things happen and if that is the only item and it really stands out as uncharacteristic of your credit history, you should be okay.

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Washington, D.C.: Dear Michelle,

I hope that you can give me some advice. I have about $50K in student loans at 8%. The monthly payment is almost $600. I have already consolodated once, but when I did so did not understand that was my one and only chance to consolodate. I know, I was stupid. But now I have almost exhausted my hardship forbearances and I can't afford the minimum payment. If this were a mortgage, I could shop around for a better rate, which would reduce my payment. Is there anything that someone in my position can do? Thanks.

Michelle Singletary: I'm so sorry to tell you that your stuck with that loan. Unfortunately because you consolidated once already you're right that you can't again. If you have a home you might want to consider taking out a home equity loan to pay off the student loan debt. Have you tried talking to the lender to see what other avenues may be open with the institution. Some student loans do allow you to pay only what you can afford based on your income. Of course that might mean adding interest on the back end of the loan but it could help until you see your way to pay more on the loan. So call the lender and see if there is anything they can do.

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High Interest Credit Cards: To the person who has the super high interest cards, remember to pay down the highest ones first and pay less on the lower interest cards. It was killing me to pay off the smaller balance of a higher interest card while the larger, but lower interest card was sitting there, but I'm now down to just one credit card payment a month, and can make much fatter payments on it.

Reformed compulsive shopper

Michelle Singletary: Good advice. Thanks!

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Washington DC: With regard to preapproved credit cards, the myfico website says about credit reports: "The report you see lists both "voluntary" inquiries, spurred by your own requests for credit, and "involuntary" inquires, such as when lenders order your report so as to make you a pre-approved credit offer in the mail. " I don't want preapproved offers. How do I stop them?

Michelle Singletary: You can opt out of such offers. Contact the credit bureaus and exercise that option.

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Get me to the church on time: Michelle, how do I know in advance what effect getting married will have on my credit score? Mine is better than my fiance's, but it is still true that the bad credit negatively affects the good? Why not the other way around? And what if I keep my maiden name?

Michelle Singletary: Well just marrying someone does not automatically impact your credit score. It only does if and when you begin to jointly open credit lines.

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Washington, DC: I just thought I'd note that our minister had us do a budget as part of our pre-marital counseling!; So if anyone thinks church counseling is about family planning, think again -- it can be quite practical.

Michelle Singletary: AMEN!

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los angeles calif: I would like to save for a new car, save
$500 a month and put down at least $10,000
next year and buy a car one year old. Is
this the best way to do it?

Michelle Singletary: Honey, with $10,000 I could buy a car outright :)
But yes, sounds like a good plan to me.

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Annapolis, MD: Hi Michelle,
Two part question. The person who handles our company's retirement plan recommends I contribute 10%-15% to my account (we are a small company and do NOT receive a match from our employer). Does this seem high? Secondly, if my wife was to stop working in order to stay at home with our child would I be expected to increase my contribution to 20%-30%??? Seems like an awfully high percentage???? Thanks

Michelle Singletary: Hi. I'm so glad to see you are planning to contribute to your company's plan even without a match. And no the 10 to 15 percent is not too much. As far as your wife you can't save in your plan for her but she can open a qualified retirement account and contribute to one even tho she is not working outside the home. And I would highly recommend that she save for retirement too (just in case you lose your mind and run off with some hussy.) That way she has some retirment income to live off too :) But of course I'm sure you wouldn't do that.

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Monrovia, Calif.: I lost my job of 13 years. Out of work for almost a year filed bankrupcy. It seems because of that I have a problem with getting my trw in order all bills listed behind nothing is positive re: my credit history. Will this remain with me always. Would like to know is thier a timel imit to this being on my credit history. I would like to buy a home someday in the near future.

Michelle Singletary: I'm so sorry about your situation. But keep hope alive. Even folks that have filed bankruptcy can be homeowners. A home loan may cost you a bit more but still it's not impossible. Just continue to pay your bills and on time and you can build up enough good credit history to qualify for a home loan. Good luck.

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Falls Church, Va.: Submitting early since I'll be out all afternoon...

I'm young, I just graduated college in May. I've never had a credit card.. I applied a couple times in school but got rejected. Just in the past month, I applied for a card from the bank I have my checking and savings account with, but I got rejected again. They always cite something like 'insufficient history'. Well, that's why I'm trying to get a card in the first place! I have no debt, I always pay bills on time, I have a fairly well paying job considering my age and the area... what is it they're looking for? How can I get started on a history?

Michelle Singletary: For you I would suggest getting what's called a "secured credit card." Go to www.bankrate.com to look for the best deals. Basically, you put money in a savings account (say $500) and you get a credit card with the same credit limit. It's a way for new credit users and people with past credit problems to build up a good credit history. Use the card for awhile (pay the bill on time every month) and eventually you will qualify for a regular credit card.

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Washington, DC: Does it affect my credit score if my mortgage lender doesn't report to the credit bureaus? My lender, which is a local institution, and both services and owns the loan, does not report. I'm concerned that my score will be lower than it should be because my years of on-time mortgage payments won't be reported. Thank you.

Michelle Singletary: You should be concerned. That's a major debt that you are paying on time that isn't getting reported. It's not that it can hurt your report as much as it isn't helping boost it. However, check your credit score. It might still be good and thu no problem. But if your score is marginal and you plan on getting a loan soon you might consider changing lenders and going with someone that does report to the credit bureaus.

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Washington, D.C: Hi Michelle,

I have a lot of debt but no, zero, zilch credit card debt. I have a first and second morgage, a student loan and I just used my last 20,000 Saving to open a promissing business. I feel good but a little pacniky. I am in trouble.

Michelle Singletary: You may not be "in trouble" but with no savings you could be in trouble if anything happens to reduce your income. It's good that you don't have credit card debt but if I were you, I would work hard to put something in savings.

Well folks I have got to run. Thanks to all your joined me today and if I didn't get to your question I'm so sorry. But I do sometimes answer questions in my column (Thurs. and Sundays in the Post) and in my newsletter.

See you in two weeks!

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