It's one thing to get hit with an interest rate increase on your credit card if you fail to pay your bills on time. 

But in the current nervous environment, you might be a good customer and be punished simply on the basis of where you live or where you shop.

Ben Woolsey, director of consumer research for creditcards.com, notes that bank and credit card companies may be suspicious of your ability to pay if you use your card at discount stores or dollar stores.  If you live in a neighborhood with a lot of foreclosures, the card companies might worry about your home equity and decide you are a poor credit risk.

Here's some other advice from Woolsey: Dormant accounts are most likely to be closed by card companies.  If you have cards stashed in your wallet for emergencies, keep them active by using them at least once a quarter.   But don't use more than 30 percent of the credit you are allowed. 

When you decide to purchase a car or house, or even rent an apartment or apply for a job, your credit score matters.

So you don't want to go into these transactions in the dark.  You want to know how they will view your credit score because if it's not up to snuff you will pay dearly -- either high interest, or in the case of an apartment, you might be sent on your way.

So even though it's Friday, and you'd like to relax, I suggest ordering your credit scores right now.  This cannot wait another day because one of the credit scoring bureaus, Experian, is going to cut off your access to your score after today.  You will still be able to see two other scores, but that's not good enough.  When banks are looking at your loan application they will evaluate three scores for you -- one from Experian, one from TransUnion and one from Equifax.

Get a glimpse of all three now by going to MyFico.com.  This is going to cost you $47.85, but it will be worth it to know what your banker thinks about you.  Click on "products" at the top of the page, and then scroll down the page until you see "FICO Credit Complete."  Order that to see all three credit reports and scores. 

If you follow my column regularly, you know that you can get a credit report free each year, and I typically don't tell you to buy a score.  But this time is different because it's a last chance for Experian.

Be aware that when you order from MyFICO.com, they will check your identity.  So be ready with specific information like your social security number and the name of your mortgage or car lender, along with your monthly payments.

          If you are stressed out about your finances and need a crash course in making your savings grow, come to the Schaumburg Township District Library, where I will be speaking Monday January 26 at 7:30 p.m.

         In my presentation  “Saving for Retirement without Living Like a Pauper or Winning the Lottery,” I will walk people of all ages through the basics needed to invest well and survive awful markets. The presentation is in the Rasmussen Room of the Schaumburg Township District Library, 130 S. Roselle Rd., Schaumburg. Although you can walk in, you assure yourself a seat if you register for this free program by calling (847) 923-3347.   

Gail,

What do you think about municipal bond mutual funds: Long Term, Intermediate Term, or Short Term municipal bond funds?  I am a long time Vanguard investor and I have been looking at their bond funds.

Thanks,

 Nelly

Dear Nelly,

There are two issues with bond funds -- one can be helpful to investors, and the other can cause investors problems.

First, the helpful part.

You've probably heard that investors insulate themselves from harm when they diversify, or buy a variety of investments.  This applies to bonds as well as stocks.  So investors, who buy a couple of bonds and depend only upon them for interest, are taking on a lot of risk.

Think of the news about General Motors lately.  A lot of retirees depend on one or two car company bonds for all their retirement income.  If General Motors goes bankrupt, the retirees will be in trouble -- unable to collect the interest they need.

Bond funds insulate you from this problem because they buy many bonds.  If one bond weakens and can't pay you interest, another bond will probably be fine so you have a level of protection.   Also, with a bond fund you have a professional manager, who decides what bonds appear to be safest and which ones aren't.  The manager takes some chances, but also tries to insulate you with safe bonds.

So diversity and professional management can be a plus with a bond fund unless you have a sloppy manager. 

But there is another side to this.  Bond funds never mature like an individual bond or a CD does.  And that can present a big risk.  By "maturing," I mean that if you buy an individual bond you will see a date on the bond.  That date is the time when you are told that you will get all your money back.  If you bought the safest types of municipal bonds, or what are called "general obligation bonds" issued by a state, you could be fairly certain you would get your money back on the date stated on your bond.

A bond fund, however, holds many bonds so there is no guaranteed date when you can retrieve your money.  If your bond fund happens to be losing money, and you need your money then for living expenses, you will suffer a loss. 

How could this happen?  Bond fund returns are highly dependent on interest rates.  If interest rates shoot up all of a sudden the bonds that are in a fund will drop in value.  It doesn't mean the bonds are bad.  But think about it.  If the fund is filled with bonds paying 4 percent interest, and all of a sudden investors can buy new bonds that pay 6 percent, why would they want the 4 percent bonds?  They wouldn't.  So the bond fund loses money on the bonds investors don't want, and the individual who needs to pull money from the fund loses too.

The risk of this is greatest in a long-term bond fund because the bonds within the fund don't mature for many years.  In a short-term bond fund, if interest rates go up, the bonds will mature soon and the manager will have money to buy new bonds that have better interest rates.

Gail MarksJarvis

     Jobs are evaporating as nervous employers are cutting costs by slashing payrolls.
Last month, about 533,000 jobs were lost; the highest number in 34 years, according to the U.S. Department of Labor. The unemployment rate is now at 6.7 percent and economists at firms such as Goldman Sachs are forecasting that the number could rise to 8.5 percent or even 10 percent by late 2009.

     Consequently, it pays for people to begin making plans in case they are laid off. And people, who have lost jobs, need to respond thoughtfully from the start so that they don’t exhaust savings prematurely and turn to credit cards or other loans that will become lead weights in a long recession.
In the current environment, with the economy weak and weakening, it could take some time to find a new job, especially if you are over 50 or in an industry such as financial services, which has been particularly hard-hit.

     Given the seriousness of current economic problems, some financial advisers are adapting the usual advice about saving money for an emergency. Typically, it is considered prudent to have three to six months of savings to cover necessary living expenses after a layoff. Currently, however, many are leaning toward a year of savings or even more.

     Here’s what to do if you are laid off or think you might lose your job.

The Dow Jones Wilshire 5000 closed today at 9870.33, down 270.15 points or 2.28 percent.

·         This represents a paper loss for the day of approximately $200 billion.

·         For the month the DJ Wilshire 5000 index is down -0.84 percent or approximately $100 billion.

·         For the year the DJ Wilshire 5000 is down –40.14 percent or $7.1 trillion.

·         Since October 9, 2007 market high, the index is down –43.88 percent or $8.7 trillion.

·         DJ Wilshire 5000 is up 18.72 percent or $1.7 trillion from the recent low of November 20, 2008.  The last bear market, March 24, 2000 to October 9, 2002, had only one market day close below -50 percent of the high. This bear market, October 9, 2007 to November 20, 2008, has had only one market day close below -50 percent of the high.

The Dow Jones Wilshire 5000, which represents most of the stock market, closed today at 9077.48, up 340.34 points or 3.90 percent.   

On paper, that means investors gained approximately $400 billion.  For the month, investors have actually made money.  The DJ Wilshire 5000 index is up 1.48 percent, or approximately $200 billion.