Ask the Experts: Financial planning, property taxes and credit scores

Q. My husband and I have a financial planner who has done very well for us in the past, but now he’s pressuring us to authorize him to do trading with our investments without our pre-approval. We are reluctant to allow this and now he is threatening to charge us additional fees for trading. What do you advise?

A. You have two decisions to make: how much discretion you want to give to your financial planner and how much do you want to pay for his services. He probably believes that he could work more efficiently and charge you less if he didn’t have to contact you before each trade. But if you are uncomfortable with giving him pre-approval to do trades, or with paying additional fees per trade, then consider finding another planner. No one should feel threatened or pressured by a financial adviser. To learn more about how to select a financial professional, go to the AARP online at www.aarp.org/money/financial_planning and click on “What Questions Should You Ask?” under “Who Can Help You?”

Q. My aunt gave me the deed to an undeveloped lot in a lakefront area. Year after year I’ve paid the real estate taxes and membership dues, which by now have amounted to more than the value of the lot. I will never use this property and there doesn’t seem to be a market for it. I’m retiring and moving to another state where I’ll be living on a fixed income. Would it hurt my credit to let the property taxes and dues go unpaid?

A. Yes. If you stop paying the taxes, state officials could put a lien on the property for the amount of the back taxes and perhaps try to sell it at a tax auction. If you don’t pay the association dues, you could face a judgment or foreclosure on the property. Unpaid judgments and foreclosures can bring down your credit score dramatically and they will stay on your credit reports for seven years. Tax liens have an even larger impact because they pull down your score for seven years after they have been paid. Consider consulting an attorney to find if you can use a quitclaim deed to transfer your interest in the lot to the property association. You may also want to consider selling the lot yourself.

Q. I have a few credit cards that I have not used in a while and have a lot of available credit. Will the availability of credit hurt my credit score or prevent me from getting any other type of loan? Should I cancel them?

A. No. Canceling them could actually hurt your credit score. One of the factors in determining your credit score is a “utilization ratio,” or how close you are to using up your available credit. Let’s say you have $15,000 of available credit on all your cards and an outstanding balance of $5,000. Your utilization ratio is one-third ($15,000 credit divided by $5,000 of debt). If you close out a card with a $5,000 credit limit, your new ratio is one-half ($10,000 credit divided by $5,000 debt), which looks like you are closer to maxing out your credit limit. So you see that the more unused credit you have, the better your score. If you want to get rid of unused cards, however, do it gradually. Call the credit card company and request that it close your account, then follow up your request in writing. Keep copies of all correspondence and make sure the company notes that the account was closed at the customer’s request.

Source: Sally Hurme