Your Questions During the Financial Crisis

Every few weeks I try to answer questions people have sent to me, choosing those that are most relevant to all. This week I've picked through my mailbag to find letters tied to the financial crisis and how to cope. You'll find resources below about debt, saving money, foreclosure and working from home to make extra money. Thank you for the smart, thoughtful questions -- and keep them coming.

Question: I have three credit cards and every month I use them I pay them off. So my three credit cards are zero balance. What I need to know is if I pay them off every month, what effect does that have on my credit score?

-- E.C.

Answer: E.C., you are a lucky, lucky person in these tough financial times. Most people who write to me about credit write to say they cannot pay their cards off. (See below.) Or maybe I shouldn't say "lucky." You are savvy.

The best way to achieve a high credit score is to use your credit cards but also pay them in full. Creditors like to see people use credit responsibly. (Opening credit cards but not using them doesn't help you nearly as much.) The only thing you might want to do differently is to get rid of one card. That's less paperwork for you. And credit scoring experts say the optimum number of cards to have for the best possible credit score is two.

Question: What is a safe credit score report to go with?

-- P.S., Wilderville

Answer: Again, I'm heartened that people are asking the right questions. It's so important to order your credit report regularly. And there are, indeed, questionable companies out there that will try to sell you all sorts of things instead of just providing your free credit report, as required by federal law. Remember, you are entitled to one free credit report a year from each of the major credit reporting agencies. So if you stagger them, you can check on your credit situation all year long. Unfortunately, the Web address the government chose for free credit reports is not very catchy, but here it is:

Question: Could you give me a number(s) for a local, non-profit debt agency.

-- O.A., Los Angeles, Calif.

Question: Is there any consumer credit help out there that is legit?

-- S.F., North Liberty

Answer: More wise consumers. It's crucial to seek out a non-profit credit counseling company, as the first reader notes. And there are a ton of crooked for-profit credit counselors out there, as the second reader suspects. These crooks take your money and do nothing for you.

So I always refer people to the granddaddy of credit counseling: the nonprofit Consumer Credit Counseling Service, which is affiliated with the National Foundation for Credit Counseling. Beware, because there are copycats who have attempted to use similar names. And CCCS is a little bit confusing because the local outfits are independently run and have their own Web sites. So the best thing to do is call the national toll free number, (800) 388-2227 and you will be referred to the CCCS closest to you.

Question: I'm 23. I work full time as a paralegal and I work part time at Target to make ends meet. My fiancée has a part-time job as well, but as much as we are working I feel like nothing is getting paid. I have three credit cards, all of which are past due, over the limit and keep accumulating month to month. I don't know what to pay first, how to pay it, or how much to pay. Help.

-- A.S., Meriden, CT

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