Question: When is the "credit bureau" system going to get dumped? "Members" can report what they want with impunity, and for any reason, including economic battering. It also abuses the Social Security number system, which is illegal, isn't it? — Sharon (Clearlake, CA)
Scott Bleier: Credit reporting may seem cold and impersonal to most everyone, but without it a bank would not give you a mortgage nor would a credit card company issue you a line of credit. It is a means for evaluating and forecasting future credit performance.
The most important factor in determining the credit-worthiness of a consumer is if he pays his bills on time. But they also use other more esoteric methods to determine your ability to get credit, plus some that are even secret. All those factors are accumulated, and a FICO score is created that has somewhat simplified the credit process.
Creditors like banks and credit card companies are the one’s who report your payment history, and the credit bureaus simply report. Sometimes they report incorrectly or make a mistake. You must play a part in maintaining your credit profile by knowing and understanding what is contained in your credit history, and new federal laws allow everyone to access a free credit report from each reporting bureau once a year. It can be done online here: https://www.annualcreditreport.com/cra/index.jsp.
There are ways to correct errors on your report along with the ability to dispute certain information. Also, communicating with your creditors who do the reporting is the only way to avert any negative reports, hopefully before they occur. Remember, you must control your credit history, not let it control you!
Question: If home heating oil keeps going up in price this winter, what do you see as the affects it will have on the economy? Is there any way a homeowner and investor can protect themself? — Jimmy (Burlington, VT)
Bleier: Older homes built before the 1970’s used oil burners with oil tanks buried in the backyard. Oil burners were dirty and oil tanks became an environmental nightmare. So over the past 30 years almost all new construction burns natural gas as heat. Also, 97% of all electric utility plants built since then burn natural gas.
The skyrocketing cost of energy has already begun to slow the economy and consumer spending. The shortage of capacity at oil refineries post-Katrina has forced the price of refined products like gasoline and home heating oil higher than they would normally be. While the price of home heating oil has doubled over the past two years, natural gas has as well, and you have few choices to escape the high cost of heating your home. You should expect to see your home heating bill go up 50% over last year.
One option would be to install a solar electric system in your home. Most states give very generous rebates to finance their installation, and it can supplement a large portion of your home heating and electrical needs. Your meter will actually spin backwards, giving you a credit with your electric company. A reputable dealer in the NY, NJ area is here: http://www.thesolarcenter.com/
Question: Do you think it would be a good idea for all elected federal officials to take a 10% pay cut and do away with the automatic 'COLA' (cost of living adjustment)? If our "leaders" are not willing to sacrifice for America then why should any Americans sacrifice anything for them? — Alan (Austin TX)
Bleier: COLA was created to protect seniors receiving Social Security benefits from the ravages of inflation. It is also a perk for government employees, as well as elected officials. While it is true that many of our elected officials do not need this perk, there are many for whom COLA does help.
We must remember that, in general, government work does not pay what the private sector does, and running for office, with its invasion of privacy and pressures from constituencies, does require a certain measure of sacrifice in order to persevere.
Question: What advice on the mix of stocks and bonds can you give a couple — who have done a good job accumulating wealth over their lifetime — to live off yearly interest while still trying to preserve the principle to pass on to their children? — David
Bleier: My best suggestion is to take as little risk possible to protect what you have worked a lifetime to accumulate. My favorite investment for your stage of life is Municipal Bonds. MUNI’s are triple tax-free and are many times insured. You may own stocks, and stable dividend-producing stocks are a low-risk bet. High quality bond-like instruments such as preferred stocks are also desirable.
If you enjoy speculating in stocks for the near to intermediate term, please do not use more than 10% of your portfolio for those endeavors. Plus, you should own your home outright.
You should also consider the use of a trust instrument to guarantee you pass on your assets to whom you wish. A will can be easily tied up in probate and contested by outsiders or other family members. A trust — which you create with the help of your attorney — can be secure enough to guarantee you live on the interest and pass along the principle to your heirs. It is also administered by whom you wish and can be made unbreakable.
Question: I'd like to begin investing in mutual funds. What's a good resource for me to research mutual funds? — Chris (Germantown, TN)
Bleier: There is useful information on mutual funds. Morningstar is the most far-reaching resource on the web: www.morningstar.com.
Fox News business contributor Jonas Max Ferris runs a fantastic and informative site: www.maxfunds.com.
Yahoo Finance has an excellent database on funds of all types: http://biz.yahoo.com/funds/.
Another way to invest is through Exchange-Traded Funds (ETF’s). They trade just like stocks but are a more efficient, less expensive and a "purer" way to invest in a particular sector of the market. A good place to start your research is here: http://finance.yahoo.com/etf.