Dear Liz: I pay for all of my online credit card purchases, usually within a few days. My monthly statement balance is usually $0, even though I use the card frequently. The card is my only open credit account. I saw my credit score recently and it went below 650. It was over 800 several years ago. Is my diligence hurting my score? Should I wait to pay my card until the statement is released? Is there another way to improve my credit?
Respond: Such a drastic drop may indicate a more serious problem, such as a late payment or collection account. Please check your credit reports with all three credit bureaus at AnnualCreditReport.com. (Enter the exact name in your browser as there are many similar sites that will try to charge you for what should be free access to your reports. If you are asked for a credit card number, you are on the wrong site.) Unexpected credit score drops can be an indication of fraud, so get it done as soon as possible.
If you don’t see anything suspicious, you can probably blame your habit of leaving a zero balance and having only one card. You don’t need to have credit card debt to have good scores, but a small balance on the statement closing date helps tell credit-scoring formulas that you’re actively using your account. You can and should pay the balance in full before the due date to avoid interest charges. Adding another credit account or two should further boost your scores.
You didn’t mention what score you saw (you have a lot) or where you got it, but consider monitoring at least one of your scores so you can gauge your progress. Banks and credit card companies often offer free sheet music. If not, consider signing up for another service that offers free sheet music. Discover, for example, offers free FICO scores to everyone, not just its own customers.
Fees for establishing a living trust
Dear Liz: A friend of mine contacted an estate planning lawyer to set up a living trust. The lawyer gave him an estimate of $5,900 for this work. My friend is single, never married, no children, owns no property or business. She does not have complex financial situations. She has a financial planner she works with on her investments and retirement funds. I’m also considering setting up a living trust with a lawyer, and my situation is similar to my friend’s – very simple. However, I can’t afford $6,000 to make a trust or a will. Is it a reasonable cost for a simple domain? That seems high to me; should it be more in the range of $2,500?
Respond: Your friend’s experience is the reason many people put off estate planning or opt for do-it-yourself solutions when they would really benefit from the advice of an experienced attorney.
Let’s start with this: not everyone needs a living trust. Living trusts are designed to avoid probate, the legal process used to settle estates. But probate isn’t a huge issue in many states. Even in states where probate is notoriously slow and expensive, like California, there are streamlined processes for small estates. Additionally, there are a number of ways other than a living trust to avoid probate, including pay-at-death designations for financial accounts and, in many states, transfer-at-death options for vehicles. and real estate.
Living trusts have other advantages: they are generally private, while wills must be made public after death. And living trusts usually include a relatively easy way to have someone else make decisions for you if you’re incapable. But you can set up something similar by creating powers of attorney for health care and finance. These documents, plus a will, usually cost less than $1,000.
There are self-help legal options online that allow you to create estate plans yourself, and some give you access to lawyers for assistance. Ideally, however, you should find a lawyer who charges a reasonable fee to review your situation, offer personalized advice and draft the necessary documents for you. If you’re having trouble finding someone, ask a tax professional or financial planner for advice. If finances are a consideration, avoid law firms with large, sophisticated offices in expensive urban centers and look for those with more modest overhead in outlying areas.
That said, the amount shown for your friend might make sense if she has a lot of money. Even without real estate investments, substantial wealth will require substantial estate planning, and it comes at a substantial price.
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions can be sent to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.
