THE COLOR OF MONEY
Applying for secured credit card may be best bet for those with debt
By Michelle Singtary
Q: I had lots of bad debt that is finally paid off. But I still can't get credit. My FICO score is 520. I know I'm going to need a new car in the next few months. Where do I go from here?
A: You may try getting what is called a secured credit card. Go to bankrate.com and type in secured credit cards. With this type of card you put money into a savings account that you can charge against. Then buy only low-priced items, pay the bill on time and off every month and that can begin to help you regain good credit. As for getting a car, wait as long as you can until you build up your credit, otherwise you will pay a steep interest rate.
Q: My husband and I are expecting our first child. He works. I'm staying home. We received our tax refund and he wants to use it to pay off our credit card. It will pay off most of it but not all of it. I'm concerned that with one salary we should just put it in savings.
A: Do both. With one salary it's critical that you have money in your savings (three to six months' living expenses). So take some of the refund and put it in savings if you don't have any savings. Now if you do have some savings, pay off the credit card debt.
Q: I am a single mother who lives in a home that is being purchased by the city for urban renewal. The city is offering around $60,000. Can you give me some general guidelines as to how to manage this sum? I want to totally furnish my house and pay my car off (that I just bought) and just have the mortgage and house bills to pay for.
A: From your note you will be able to get another house. If so, I would use the rest to pay off the car, but I would also build up my savings if I didn't have any.
Q: I am only about halfway through my car lease and setting aside money already for the next step. Now, assuming everything looks good (no penalties) — what would you advise to do at the end? Buy it outright if I can get less than they say its worth? Buy it outright if it's been reliable and a good value to me? Start with another car, and only do real financing?
A: Leasing is bad. In your case, once the lease is over, buy a low-priced, reliable used car. If you can afford the car you are leasing now then look into it. But compare it with other used cars of the same make and model at a different dealership (or a private owner). If your current lease offers the better deal, buy the car you are leasing now. If not move on and never lease again.
Q: My parents are both aging. Their health is in various levels of decline. They just took a second mortgage out on their house, and have maxed out all of their credit cards. Their healthcare needs are provided for as both have been with the government for their entire careers. I am trying to figure out how I can protect myself from inheriting their estate and having to pay off their debt. I'm 30 and do not yet have myself in a financial position where I can support their finances. I don't even know if I need to be concerned about their debt. Does it just goes away when they die? Do I need to see an estate attorney, a financial adviser, or both? Are you aware of any books that I could use to educate myself on this topic?
A: As an heir you do not inherit your parents' debts. Their estate — if there is any money left — has to pay off any debts but not you. Now, if I were you I would call AARP and talk to someone there about how you can better help your aging parents handle their finances.
