Need advice about how to handle your personal finances? Whether the struggle is saving for retirement, organizing your bank files, talking about money responsibility with your spouse or loved one, Post personal finance columnist Michelle Singletary offers her advice and answers your tough questions.

In today's column , she addresses the impact of settling credit card debt on your credit score.

A transcript of today's discussion follows.

Read Michelle's latest columns , check out her Color of Money Book Club selection archive or sign up for her weekly e-mail newsletter.

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Washington, D.C.: Hi Michelle--

My fiance and I both pulled our three-bureau credit reports and scores and shared them over the weekend (I got a 744, FI was 570ish). On his report, we noticed a Verizon phone bill recently reported a charge-off for a $120 balance on his account--he was not aware of this balance and had not lived in this location for several months prior to the charge-off. Now when he talks to Verizon, they won't give him details about the origin of the charge, but will only say the debt has been sold to another company.

How should we go about resolving this issue? Through Verizon or through the 3rd party collector? Is there any hope of reviving his credit report?

Thanks in advance!

Michelle Singletary: Have your finance go to this site

http://www.privacyrights.org/Letters/letters.htm#Debt

Look for the right letter and write to the creditor disputing the debt. He should also challenge it on his credit report or reports.

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Michelle Singletary: Well welcome all. Lots of questions today as always so I'm just get started.

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Virginia : The company I've slaved for since 2003 is being purchased, and I've just learned that I'll be getting (after taxes) about $70k out of the deal. I'm kind of alarmed at the prospect.

I'm in my 20's and have no debt, and no idea how to even begin handling this money. I definitely want to stash this windfall someplace where it can become a tasty nest egg. What should I be doing?

Michelle Singletary: First don't do a thing -- at least for several months. Most people when they get this kind of money waste it by doing the wrong thing.

You may want to consult a financial advisor, perhaps a fee-only advisor. You don't want anyone selling you something. You just need a plan.

But to start, figure out your living expenses for six months and deduct that money from the $70,000 and put it in a high-yielding money market (check on www.bankrate.com for best rates). If you already have an emergency fund then pay off any credit card debt -- ALL OF IT.

Do you have student loans? Pay them off. This is an opportunity to get debt free.

If you have an emergency fund, have a retirement fund that you were funding (and probably temporarily aren't now of course, and you have no debt....then you can think of other ways to invest this money. Perhaps it's the beginning of a house fund (downpayment, closing costs). I highly recommend you buy a home if you can.

see what I mean. You need a financial plan. Lots to think about because that's a good chunk of money.

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Rockville, MD: Michelle,

Describing yourself as simply a financial advisor is disingenuous. You give financial advice peppered with religious advice. Who cares what the bible says? We are not all bible thumping evangelicals. If you are going to continue to give bad financial advice based on your religious principles, you should at least warn people that sometimes, your advice will be bad financially, especially if you allow your religion to overcome good financial sense.

Michelle Singletary: I'm assuming you are talking about my column today.

Well first I never describe myself as a "financial advisor." I'm a personal finance columnist.

I give my opinion. My opinion is based on research. It's also based on my "personal" opinions and my beliefs. Would you expect George Will to do no less?

Yes, I'm a Christan and darn proud of it.

And yes I think debt is evil. Because it is.

And yes I believe that the GOOD BOOK has GOOD advice on how we should handle our finances. You don't have to be a Christian to do the right thing.

I have principles. And one of those principles, which clearly you don't have, is to pay people what I owe them.

We all pay when people skip out on their debts.

This woman's creditor (the orignial one) was still trying to collect her debt. They hired a third-party debt collector to get it. She decided to do the right thing and pay it since now she's in the position to do so.

I think that's great. Your tone bad!

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Close cards or no?: Dear Michelle --

Today I paid off a credit card, the 3rd I have paid off in the last 5 months (one more to go!!!)

When the balance is $0, should I close the card or not? I used to think you were supposed to, but then I read somewhere that you shouldn't because the more lines of credit you have that don't carry a balance, the better.

What is the best thing to do? Thanks.

Michelle Singletary: Don't close the account, especially if it's an old one. It helps your credit score. Now if you have to pay an annual fee, then close it if you aren't going to use it.

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Alexandria, VA: Hi Michelle,

I purchased your book, and it really is helping me. I am engaged, and I am in a lot of student loan debt ($200k). I accumulated this debt from graduate school. My fiance has about 30,000 in student loans. Any advice in terms of getting out of this debt? Thanks so much.

Michelle Singletary: First Congrats! Second, WOW!!!!!!

Okay now we both should take a breath. That's massive amount of debt between the two of your.

So you know starting out you two will have to really keep expenses low and massively attack that debt. Every spare penny should go toward it. You just really need to budget well.

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Washington, DC: Does it make sense to take out a loan from my 401(k) to pay off my credit card balance in full? Credit card interest rate is about 13%.

Michelle Singletary: Don't do it. Money missing from your 401 (k) is money that can't work for you.

Get on a debt plan and just aggressively pay the debt off with your earnings. That may be making some tough choices but one I wouldn't make is touching my retirement money.

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Washington, DC: Have you read this week's Boston Globe investigative series on debt collection tactics? As a Massachusetts native, I found it quite shocking. Do such abuses happen in the DC Metro area?

washingtonpost.com: Boston Globe Special Report

Michelle Singletary: I have read it. It was indeed scary.

I've written about people's rights when creditors come calling.

Today I wrote about it from a different angle -- the creditor.

Because there are two sides to this debt crisis in America.

Yes there are some nasty debt collectors out there...roaches really. They torment good people, who often have just fallen on hard times.

But folks many people willingly accept these debts. They charge on cards they know they can't pay. People are living above their means. And when you charge you agree to the devil's terms. Don't want to play with the devil? Then limit your reliance on debt. Charge only what you can pay off every month. Consider debt evil and you will think twice about going into debt.

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Phoenix, AZ: Would it really be so hard to keep the Bible-thumping out of your personal finance articles? It really is jarring. A lot of your advice is very good, but the religion stuff is extremely off-putting to many of us.

Your advice isn't any better it it's backed up by a bible quote. Personally, I would prefer to know that you are making decisions based on knowledge and research rather than a mandate from some mythical deity.

It makes it kinda hard to take you completely seriously...

Michelle Singletary: I'll just pray for you.

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Lithia Springs, Georgia: Do you think Debt Management plans are a option good for paying off debt if a person has 60K of credit card debt.

Michelle Singletary: I do if you just can't handle making all the calls yourself. If you can't handle sending out all those bills every month. If you can't handle getting called every month. Just be sure to go to a good agency. Don't pay too much for a DMP. The set up cost shouldn't be more than about $50 and about $25 a month in fees to set the plan up for you. Go to www.debtadvice.org to find an agency near you.

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Lansdale, PA: I was wondering if you could answer a question for me. This concerns charitable contributions. I always made a point of writing personal checks for contributions because I wanted the cancelled check for tax records. My cancelled checks are no longer returned to me only small copies of the face of each check. More and more charitable solicitations allow you to use a credit card. I always resisted this because I was under the impression that the charity would not get the full amount of the gift (since the card company I understood takes a percentage of each purchase when something is charged). If I use a credit card and make a $100 gift how much of that will the charity get? Thanks for the attention to a long-winded question.

Michelle Singletary: Well typically a credit card company will charge a merchant or business anywhere from 2 percent to 3 percent for the transaction.

But really I would still do checks. IF you ever need to prove you make the contribution you can get a copy of the check. And just keep your checking statement with the check information in your tax file.

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Southern MD: One other thing to consider when looking to accept a debt payoff settlement is that the amount of the debt forgiven is taxable. It is considered income.

Michelle Singletary: You are right. In many cased the forgiven debt is considered taxable income (I'll be writing about that soon).

Can't fit everything into my column space.

But thanks for pointing that out.

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New Carrollton, MD: Michelle, I used to apply for store credit cards, that would allow me to get discounts on my purchases. When I had paid off the bills, I would close that account. I realize now that it was a bad idea to open and close so many cards. How badly does this affect my credit score, and for long?

Michelle Singletary: Well it's unclear how many points your credit score can drop by. But just know it's a very, very bad idea to sign up for those cards just for that discount. A lower score can cost you a good interest rate and over time that adds up to much more than the 10 percent you save that dat. Plus store credit cards dont' help your score as much as a regular credit card.

So just keep saying no to those offers.

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Raleigh, NC: So what's your opinion on this situation? My husband had a very small credit card debt (about $400) from over 10 years ago that was sent to collection. He couldn't pay it while he was in school, and then avoided it, and then moved and mostly forgot about it. It has long since fallen off of his credit report. He recently got a letter in the mail, offering to "settle" the debt for about half the original amount. Everything I've read says to ignore it, and don't talk if they call, because we're way past the statute of limitations and they can't collect it now, and if we pay it then it might go back on the credit report. It's just been one letter, they're not harassing us or anything. What do you think?

Michelle Singletary: Did he owe the money? Did he get goods or services?

Really today's column was about people's position on debt...yes paying it now "could" "maybe" hurt his credit score. But what's the larger question here folks.

How did he forget he owed someone $400. You said he avoided it. Meaning he didn't pay it. Somebody took a hit for his avoidance. You. Me. Other credit users. You think those companies don't pass that along to other consumers?

Ask your husband -- without the question of your credit rating -- what does he think is the right thing to do?

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Washington, D.C.: I don't know if you fully explained your rationale about not borrowing from the 401K to pay off credit card debt. In some cases, like the Federal TSP, when you repay the loan, you are repaying yourself, albeit at the lowest (G Fund rate). However, +5% to yourself seems better than -9% to -25% to the credit card company. The key is to not run up the debt again.

Michelle Singletary: I understand you wanting to help me out here. But taking the full amount of money out ...means it's not earning a return. If he or she pays that money back over time, he or she is still not getting a return on money that would have been in the fund. Now yes, perhaps the market could tank and the fund would drop anyway and thus paying himself and herself back is a better return. But I'm against using debt to repay debt and that is essentially what the question is about.

What I'm doing here -- in this chat and in my column -- is not just giving you the facts but I hope to rehape your mindset.

Taking the time to repay that credit card debt from earnings or my cutting expenses is the hard road. Taking the hard road often makes you not go back down the debt road again.

You save for retirement for your retirement. Let that money be. If you think that it's untouchable then perhaps it will change your use of debt/credit.

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re: charitable contributions: You don't need a canceled check as you should get notification of some sort from the charity (typically a letter).

If you do it on line, this might be an email you could print out.

Using a credit may seem like not all of the money goes to the charity, but think about how much time it may take them to process thousands of checks, rather than getting -one- check monthly from the credit card company.

Of course, if your contribution is substantial (i.e., 100k or more) then the fees might not be worth it. But if it's smaller, then it might be - because no one has to go to the bank and endorse thousands of checks.

Just a thought.

Also, with emailing you confirmation, they don't have to go to an extra step of sending you a letter - saving them money as well as time.

Michelle Singletary: Any charitable groups out there tired of going to the bank to cash checks?

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Fiance's credit history: Hi -- I just got engaged (and my fiance and I are very into your advice about sharing all your financial info). He has almost paid off some modest credit card debt ($1500) from his job-searching period, and I've never made a late payment in my life. What's the easiest way to help out his credit score? (I trust him completely, but he doesn't really need another card.) Could I make him an authorized user, and then we'd cut up his card after a purchase or two?

Michelle Singletary: Don't do anything until you get married. IF he just has the debt and his score is decent, you'll be okay as a married couple.

Once you get married and the two of you want to boost his score than yes add him on as an authorized user.

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Rockville, MD: Hi Michelle, love your column.

My wife and I have a car payment that we can pay in advance with no penalty. We have about four years left on it. Our dilema is do we pay the car loan off early by increasin gour monthly payments or put that money into savings like a CD. FYI--the interest rate on our car loan is around 6%. Thanks.

Michelle Singletary: Well how's your cash flow? Do you have all the other bases covered -- emergency fund, retirement fund being fully funded, no other credit card debt, etc.

If so I vote for being debt free.

Now I know that will probably enrage all those credit users out there who will say keep your money, invest it....

But pay off the car and then take the card payments you were going make every month and invest it. This way if anything happens --you get sick, lose your job, etc. you are debt free and in a much better position.

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Gaithersburg, Maryland: My mortgage loan was recenlty sold to another company. I looked the company up on the Better Business Bureau & they have a bad reputation. I am trying to refinance my mortgage, but my credit score is only 655. Any suggestions on what to do. Should I stay with this company or should I continue looking for a different mortgage company?

Thanks, Anna.

Michelle Singletary: Stay until you have problems. But just make sure you read over your statement and that your monthly payments are being properly applied, etc.

But don't cause yourself money just yet until you have a problem.

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Wisc. Ave. NW: Hi Michelle,

I look forward to all of your chats.

Don't let them discourage you! Being a Christian is who you are, and you come as the 'whole package' financial advice AND Christian.

My question: Should I fully fund my 403(b) first, or open a Roth?

Thank you!

Michelle Singletary: Thank you. I'm not discouraged. I know I give good, basic common sense advice. I do my wordkly homework. I know what I'm talking about. Like with any advice. Don't like it. don't take it.

As for your question. I would say it depends on what you think your tax bracket might be when you retire. Also, you can put away more in the 403 (b). If you can do both. Do both.

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Alexandria, VA: My Aunt recently told me that she is going to file bankruptcy. A few months ago she apparently went through a depression and just stopped paying her bills and when that happened not only did she get late fees, but because of the new credit card/bankruptcy laws, her minimum payments shot up to the point that she couldn't pay them. Yes she owes the money and yes she should pay, but when she tried to go through debt counseling that was supposed to be non-profit, she had to pay $100 and was then told that she would have to pay a monthly amount that would only leave her $400 which would be enough to cover medication and gas to and from her job but almost nothing left over for food and other items that come up. She feels like she is being forced to go into bankruptcy when she would rather pay her debts.

Michelle Singletary: Your aunt went to the wrong agency. Have her try one more time. Got to www.debtadvice.org. She may be at the point that a legit agency can't help her.

but if she wants to pay her debts you could also help her contact the creditors. She could set up her own repayment plan. IF that doesn't work she should at least talk to a bankruptcy attorney. I don't believe in debtor prison.

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Charity--Credit card or check: Having worked in many different non-profits, I have to suggest ASKING someone in the fundraising department which is easier for them. If it is a small non-profit, just like many small businesses, they might not get enough credit card volume to make it pay off. For most larger agencies, however, credit works better. Either way, they will be GRATEFUL for the support!

Michelle Singletary: Good point.

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Washington, DC: The women in the article today had her debt sold to a debt collector - right? If she paid the debt collector, then the original creditor lost money on her (by selling her debt at a discount) and the debt collector made a lot. It seems that she did not make amends to the correct creditor.

Michelle Singletary: Not all creditors "sell" the debt. Some hire companies to still try to collect for them and the company get's a percentage of what they collect.

Either way, she felt she owed the entire amount and wanted to be free and clear. That's the point.

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Denver, CO: Michelle, thank you for your timely article. In the past few months I have paid-off an old credit card debt as well as old parking tickets that have come back to haunt me. It really hurt to take that money out of savings to pay the debts off but I now feel as if a weight has been lifted. I am 100% debt-free and rebuilding my credit. You were right in your previous posting about trying to change people's mind-sets. My mind was changed about 3 years ago when I started dating my beau (a saver) and reading your columns and books. I used to think I could avoid past debts and they'd go away. Not so. Keep up the good work!

Michelle Singletary: Amen!

Thank you.

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403B VS. Rother: I think you missed a big point - if her employer matches for the 403b, do that. It's free money.

Michelle Singletary: I did forget that. Thanks.

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Roseville, CA: Hi Michelle,

A colleague of mine is planning to open a restaurant soon. He's an excellent cook, and I'm interested in helping him out as an investor if he decides to accept outside funding. I know that there are legal things we have to do, but from a financial standpoint, if I put in say 5% of what he needs to get going but act as a limited partner (financial stake only, no management), what is a fair way to divy up profits and losses going forward? The 5% is an easy answer, but he has good, ambitious plans to expand broadly beyond one restaurant.

Michelle Singletary: Honestly, if I were you I would seek the advice of an attorney and the three of you work out what's fair. Just make sure you completely understand the risk. Ask to see a business plan. And frankly also understand that more than 90 percent of restaurants fail.

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15K: Submitting super early so I don't forget. In terms of the number of credit cards you have in general... I have many store cards and I've heard mixed opinions on it. They're all empty, so on one hand they increase my total amount of possible credit without increasing the balance (thereby making my total percentage of used credit smaller than without them). But I heard having too many cards hurts your credit score. What should I do? Also what should I do about major credit cards that are empty and that I'll never use because of the APR? I can't get them to lower it anymore, and so I plan on never using them.

Michelle Singletary: I woudln't worry. If you don't have a balance or keep them low you are fine. Close the store cards if you don't think you need any credit in the near future. Because closing can bring down your score. Otherwise do nothing -- but keep the balances low.

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Beaumont, CA: I was impressed by your answer to one of the first questions about what to do with $70K. It is amazing how many people and young couples today have no sense of how they spend their money. They don't have a good budget and carry around lots of cash. I hope you will emphasize the need for these financial basics that are needed before any investment type decisions are begun.

Michelle Singletary: I emphasis it all the time. Thanks.

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many credit cards: Michelle,

I'm confused. An earlier poster said she thought that it helped your credit score to have many credit cards with $0 balance. When I refinanced my house they told me that it hurt your credit to have available credit even if you don't use if, because you could use it. Which is true??

Thanks!

Michelle Singletary: Both. From a credit scoring point of view having a lot of cards with no balances doen't hurt your score.

But the lender may have it's own policy and look at all the cards as a negative. Keep in mind that your credit score or scores is just one part of the decision to lend you money.

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seattle, WA: as far as that woman and her debt- the idea that it is the

"creditor's money" is a bit much. a lot of that is probably

creditor's fees- which as we all know are worse than most

loan sharks.

Michelle Singletary: Then don't swim with the sharks.

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Washington, DC: As someone who works in a small non-profit, please, please, please write a check when you can rather than donating through a credit card. If you use Network for Good, they charge us 3%, when we were processing our own credit card charges we had to pay 6% (lack of volume). We always send a thank you/acknowledgement letter which can be used as proof to the IRS.

Michelle Singletary: Another point of view.

Perhaps it's best to ask the charity.

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herndon, va: as a long-"lapsed" Methodist, let me note I expect each columnist to put his/her beliefs in the column - that's why the columnist's name is at the top! For those who don't want to read it - folks, you can just move your eyes to another place on the page (but you'll be missing some good advice!)

Michelle Singletary: Thank you!

But don't stop reading the column or the chats or the e-letter or my book. Push past the opinions and the advice is sound.

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Silver Spring, Md: Hi, Michelle,

I just want to stand up for you. Somehow, people don't seem to get that you're a columnist, who writes with her own "voice," as you've pointed out. If you don't like Michelle's advice, don't read her column. Other people who give advice get that too--Tom, Carolyn, etc. People will say, "what are your qualifications?" or some such. People, if you were paying more than 35 cents for the advice (or free, if you're going online), you could complain, but seriously, just don't read it if you don't want to hear it.

Michelle Singletary: Although I do have qualification....:)

But I get your point and support.

And still love you all.

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Baltimore, MD: Hi Michelle,

What advice would you give to a 50 something father with two children who work sporadically at low paying jobs and keep running to good old Dad for money? One child (22) is in college, but has 2 very young children to care for.

This man and I are planning a life together but I'm beginning to wonder if this behavior will continue. He very recently told me that he desires to "lock-up" his money in an account so that it won't be so readily available when they ask for it. Any advice is appreciated.

Michelle Singletary: Tell daddy I said to practice saying "No."

Also tell him I said he's not helping his kids become adults. He's actually hurting them by not forcing them to budget and live within their means.

But if you can't get thu to him. And he won't listen to me, I would think twice about merging your life with him. That's a huge red flag .. that might be the source of a lot of fights in the future.

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Pittsburg, PA: For the couple with a lot of student loan debt (I'm a financial aid officer):

First and foremost, I hope that you consolidated while rates were low. Second, sign up for the extended repayment plan. With $200,000 in loans, you can get up to a 30-year repayment plan. Now, you don't want to take that long to pay it off, but it will give you the lowest minimum monthly payment, in case your monthly cash flow runs short. Pay as much as you can every month, but you'll have that lower required payment in case you need it.

Finally, if you ever have any trouble making your payment, or even think you might, CALL YOUR LENDER. They're happy to work with you BEFORE you get into trouble, through deferments and forbearances, and the last thing you want is a delinquent student loan.

Actually, one more thing: if you're eligible for an economic hardship deferment (which is based on your income and your debt), take it. It means that the subsidized portion of your loans will not accrue any interest. Also, it will mean that you do not have to make payments - but go ahead and make payments anyway, as much as you can every month, while you reap the benefits of less accruing interest.

Michelle Singletary: Thank you so much for taking the time to send this advice. I would have but was on to other questions. I've actually written quite a lot about this. Please check out the archive of my column to get more details.

Glad I stuck around to post this.

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Warrenville, IL: Ms. Singletary--

Love your column, love your advice.

Disclaimer: I'm not a Christian. But I agree that people should pay what they owe. They made the decision to purchase something, but didn't think far enough ahead to budget for that something.

I once knew someone who graduated from college and walked into a really high-paying job (in today's dollars probably around $100,000). He felt great about that, especially when he realized that nobody he knew was earning anywhere near as much. So, when he ate out with friends he always insisted on paying for everyone. In fact, he always insisted on paying for everything when he was out with friends.

How did his story end? At some point he realized that his finances were totally out of control. He would never be able to pay off the debt that he had accummulated. He panicked. He disappeared. Walked out of his life, away from his friends.

I have no idea what he ended up doing. But every day I see people who can't deny themselves any desire as long as they can charge it. And I wonder how many of these folk will someday be so saddled with debt that they too will decide to disappear.

So, yes: please keep telling folks how to protect themselves by saving money, by planning for their future, by limiting their purchases. To me--religion or no religion--that's the only sensible, realistic, honest way to live.

Thanks.

Michelle Singletary: Your welcome.

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Michelle Singletary: I have got to go folks. Thanks for all the comments, snipes, advice, support and questions.

All of you makes this chat so interesting. And to think it's all about personal finance. We are talking about something that not a lot of folks take the tiem to think about or debate.

So thanks for taking time out of your day whether you agree with me or not to make this chat a great forum.

Keep reading. Thurs. and Sunday. Sign up for the e-letter (go to the biz home page click on the link for personal finance).

Get my books "Spend Well, Live Rich" and "Your Money and Your Man." Watch my television show on TV One "Singletary Says."

Most important, have a wonderful, peaceful, cool, blessed day. And keep those debts low and your savings high!

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washingtonpost.com: You can also sign up for Michelle's e-letter here.

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