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

Answer: A.S., too, could benefit from credit counseling. Here's how it works: you go to Consumer Credit Counseling Service with copies of all your bills. The counselor talks to you about the choices you've made and educates you about how this affects your credit and how to do better, if possible.

CCCS often tells people to cut up all their credit cards, so brace yourself for some culture shock. (Many CCCS centers have a giant vase in their front lobby full of shredded client credit cards.) Then, CCCS contacts your creditors and negotiates new payment plans for you. You send a lump sum to CCCS each month and CCCS forwards it to the companies. One note: renegotiating your bills through a credit counselor does show up on your credit report and may lower your credit score, so if you think you have the stomach for self-help, consider it. Most people are overwhelmed and need a calm, cool outsider to guide them out of the money pit.

Question: I have heard on news stories that there are agencies to help people who have gotten behind on mortgages, that are free. Before things spiral totally out of control, I need to contact one of these agencies. Your help in pointing me in the right direction would be greatly appreciated.

-- RR, Holly, Mich.

Answer: The Department of Housing and Urban Development provides this great interactive map where you can click on your state and get a list of low or no-cost housing counselors in your state. The key is to go with a nonprofit housing counselor who you seek out, rather than a for-profit con man who approaches you. So, please, click here for the HUD list and read my column from last week for more information for those facing foreclosure.

Question: You posted some time ago a list of legitimate companies that pay people to work from home. Would you please send me the list, as I recall it was only a few companies. Thanks so much for your time and help in this matter.

-- J.S., San Antonio, Texas

Answer: Actually, I mostly do stories about where not to turn for help and have written in the past about work-at-home scams in which you pay money up front and get nothing. But my colleague, Tory Johnson, has researched legitimate work at home opportunities and recommends the following links as places to look.

Question: I believe it was you on "GMA" telling us how to save on small things. One of them you mentioned was doing away with our landline phone and using our computer in some way. Could you give me who/what to contact for more information? Thank You.

-- B.J., Ashland, Ohio

Answer: In these tricky economic times, folks are looking for creative ways to save any way they can. One idea that I have mentioned on the air in the past is computer calling, where you attach a headset to your computer and talk over the computer instead of a traditional phone line. (This is different from Internet calling where you have a regular telephone but the signal is transmitted over your cable modem.)

If the person you're calling has the software on their computer, too, even international calls are free. Or you can pay about $7.50 a month for unlimited domestic calls from your computer to other people's regular phones. Skype is the most well-known provider. Because I don't test products, but my friends at Consumer Reports do, check out what they have to say about Skype and similar services by clicking here.