Ask Liz Weston

Get smart with your money

debt

Tuesday’s need-to-know money news

By

Today’s top story: How your money story can help you break free. Also in the news: Why you should freeze your child’s credit, 4 things that could make you a target for a tax audit, and what happens if you don’t pay a debt.

How Your Money Story Can Help You Break Free
Going way back to the beginning.

Why You Should Freeze Your Child’s Credit
Even children can be victim’s of identity theft.

4 Things That Could Make You a Target for a Tax Audit
Don’t leave yourself vulnerable.

What Happens if You Don’t Pay a Debt?
Nothing good.

When your parents die broke

By

Blogger John Schmoll’s father left a financial mess when he died: a house that was worth far less than the mortgage, credit card bills in excess of $20,000_and debt collector s who insisted the son was legally obligated to pay what his father owed.

Fortunately, Schmoll knew better.

“I’ve been working in financial services for two decades,” says Schmoll, an Omaha, Nebraska, resident who was a stockbroker before starting his site, Frugal Rules. “I knew that I wasn’t responsible.”

Baby boomers are expected to transfer trillions to their heirs in coming years. But many people will inherit little more than a pile of bills. In my latest for the Associated Press, what to do when your parents leave behind debt.

Q&A: The reasons behind falling credit score

By

Dear Liz: Please explain to me how one’s credit depreciates. After paying off my home, my credit score went from mid-700 to mid-600. There were no changes or inquiries. I built it back up to 734, got into a tight spot and took a loan from my bank. I just checked the score again and now it’s 687. I have not been late or missed a payment. I thought keeping current on all payments and in some cases paying more would help, but it’s not. I need some help and direction.

Answer: We’ll assume that you’ve been monitoring the same type of score from the same credit bureau. (You don’t have just one credit score, you have many, and they can vary quite a bit depending on the credit bureau report on which they’re based and the formula used.)

Paying off a mortgage could have a minor negative impact on your credit scores if that was your only installment loan. Credit score formulas typically reward you for having a mix of installment loans and revolving accounts, such as credit cards.

But the drop shouldn’t have been that big. Something else probably triggered the decline, such as an unusually large balance on one of your credit cards.

Scoring formulas are sensitive to how much of your available credit you’re using, so you may be able to restore points by paying down your debt if you carry a balance or charging less if you pay in full each month. There’s no advantage to carrying a balance, by the way, so it’s better to pay off your cards every month.

Q&A: Can creditors get your IRA funds?

By

Dear Liz: You recently wrote that workplace retirement plans offer unlimited protection from creditors but that IRAs are protected only up to $1,283,025. When I transferred my 401(k) to a rollover IRA, the advisors at the brokerage assured me that the rolled-over money also enjoys the unlimited protection. Your article seems to imply otherwise. Can you clarify what is the correct rule?

Answer: Two sets of rules apply, which causes a fair amount of confusion.

In bankruptcy court, your transferred money would be protected. Money rolled into an IRA from a workplace plan such as a 401(k) enjoys unlimited protection from creditors in bankruptcy filings. Outside of bankruptcy court, however, creditor protection is determined by your state’s laws, which may not be as generous. If someone successfully sues you and wins a judgment, for example, your IRA could be at risk.

Wednesday’s need-to-know money news

By

Today’s top story: How debt settlement can make a bad money situation worse. Also in the news: Using an IRA as a legal, last-minute way to lower your taxes, 4 reasons why it’s smart to buy a used cell phone, and how to budget as a freelancer.

Debt Settlement Can Make a Bad Money Situation Worse
Not the perfect solution.

An IRA Is a Legal, Last-Minute Way to Lower Your Taxes
There’s still time for 2017 taxes.

4 Reasons It’s Smart to Buy a Used Cell Phone
Saving on new-to-you tech.

How to Budget as a Freelancer
Budgeting when income isn’t reliable.

Wednesday’s need-to-know money news

By

Today’s top story: What a travel agent can do for you that a search engine can’t. Also in the news: How one couple paid off over $200,000 in debt, 6 ways to weed out shady schools, and why your credit score may not be as good as you think it is.

What a Travel Agent Can Do for You That a Search Engine Can’t
More than just booking a ticket.

How I Ditched Debt: Setting Pride Aside and Asking for Help
One couple’s story.

6 Ways to Weed Out Shady Schools
Just because it has “university” in the name doesn’t mean it’s legit.

Why Your Credit Score May Not Be As Good As You Think It Is
So many scores.