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Need to Throw Away Money? These 'Erase-Bad-Credit' Web Sites Can Help

October 01, 2000|LIZ PULLIAM WESTON

Q: I recently looked at a Web site that claims to be able to erase bad credit, FBI records and driving records. Do you have any suggestions on researching the company to find out whether it is reputable?

A: Perhaps you could try calling one of those psychic hotlines.

Honestly, if you can't tell this is a fraud, then go ahead and hand over your money. You're going to lose it to some scam artist sooner or later, so you might as well get it over with.

The way these sites "erase" true, negative items from your records is by instructing you to create a new, phony identity. Does that sound legal, ethical or right? What's more, your new false identity won't have any credit history, and guess how willing lenders are to extend credit to someone who has none?

Federal regulators keep trying to stamp out these sites, but they multiply like cockroaches. With a steady diet of gullible customers, it's no wonder.

If you want real help in improving your credit rating, consult a book such as Robin Leonard's "Money Troubles: Legal Strategies to Cope With Your Debts." Fair, Isaac & Co., a leading credit scorer, also offers information on its Web site at http://www.fairisaac.com.

A Tip on Student-Loan Debt

A: I read your column about saving for college and thought you may be able to help graduates like me who are struggling with student-loan debt. My parents were not able to pay my tuition or help with loans; it was all on me for four super-expensive years of private college education. The new tax break for loan repayment has helped, but the loans are still eating me alive. If I were able to manage student-loan debt better, or find some other tax break, I could start saving for a home or purchase a car. Would you please help me and others in my position with your advice?

A: First, I'm going to slip a word to students who are thinking about taking on huge debt for a "super-expensive" private college: Think again. As you can see, these big debts will put you behind the eight-ball from the minute you graduate. You'll probably have to put off saving for retirement and a home, and there's no guarantee your private college diploma will get you one extra dime in compensation to make up for what you've spent.

Putting off saving for retirement is no small deal. Say your retirement savings in your first 10 years out of school are just $1,000 a year less than they might have been because you had to pay student loan interest. That $10,000 investment could have turned into more than $540,000 by the time you're ready to retire. Saving as much as you can as early as you can is the easiest way to meet your retirement goals. Delaying your retirement saving just causes grief in your later years (ask the baby boomers).

OK, end of sermon. Now, your first task is to determine whether it's really your student loans that are killing you, or whether your other spending may be out of control. New graduates can get in over their heads with too-expensive rent, dinners out, new furnishings and the conviction that they "deserve" to splurge a little after four hard years of hitting the books. Right. Anyway, take a look at your spending and see where you might economize. If you're carrying a balance on your credit cards, knock it off. That's proof you're living above your means.

Second, consider a consolidation loan that can extend your 10-year repayment schedule to 20 or even 30 years, thus reducing your monthly payment. Although it's usually a stupid idea to stretch out your loan payments any longer than absolutely necessary, student loans can provide the occasional exception if consolidation allows you to save for other important goals, such as retirement and a home. (A new car is not an important goal--it's a luxury for people in a lot better shape economically than you. If your beater gets you to work and back, it's fine for now. If it doesn't, buy used.)

You already know about the tax deduction for student loan interest available to middle-income taxpayers. You may also qualify for a discount on your interest rate by making on-time payments; ask your lender.

Where Young Investors Can Start

Q: I am 12 years old and I have accumulated $2,500 in my savings account. I would like to invest my savings in a mutual fund or stocks but I do not know how to do it. Would you please show me the steps I could follow to realize my goal? Thanks a lot.

A: Good for you! There are several good Web sites aimed at helping young people learn about money and investing. Check out Liberty Financial's Young Investor at http://www.younginvestor.com, Investing for Kids (designed by kids) at http://library.thinkquest.org/3096/ and, of all places, the Wisconsin Department of Financial Institutions at http://www.wdfi.org/ymm; click on DFI KidsPage. Good luck!

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Liz Pulliam Weston is a personal finance writer for The Times and a graduate of the personal financial planning certificate program at UC Irvine. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. She regrets that she cannot respond personally to queries. For past Money Talk questions and answers, visit The Times' Web site at http://www.latimes.com/moneytalk.

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