Pay off the loan on your car before trading it in

Dear Liz: I owe $7,000 on my 2002 Nissan Altima. I am looking for a used eight-cylinder truck. (I drive a company truck, but I need one for home.) I was wondering if I should try to sell outright or go to a dealership. I know that most dealers are trying to get rid of trucks, and I want to hit them while they need to move these vehicles. I have a credit score of 568, so I am not in too much of a haggling position. Please steer me where I should go.

Answer: The answer is easy: nowhere.

You're in no position to buy another car. You still owe money on the one you have, and your credit is terrible.

If you walked into a dealership right now, you'd be doing so with a big red target painted on your forehead. Dealers live for customers who don't realize how stupid it is to trade a car before they've paid it off. Dealers know these buyers are impulsive and unsophisticated -- ripe targets for all kinds of expensive financing, insurance and warranty schemes.

Furthermore, getting a car loan with bad credit has gotten more difficult. You may well get turned down by your best source of funds -- your local credit union -- and wind up with a subprime loan at a less-than-fantastic interest rate.

So cool your heels. If you "need" a pickup for weekend chores, then rent one. Once you've paid off your current loan and boosted your credit score, you'll be in a much better position to get a reasonable deal on your next vehicle.

Planner may help protect 401(k)

Dear Liz: Can you offer suggestions on what I can do to preserve the bulk of my 401(k) during a turbulent market? I fear the balance I've managed to save over the years could easily dwindle. I decided to retire three years ago, at age 53, after being laid off. Currently my husband and I are financially comfortable living on his savings, Social Security and pensions. Our intent is to leave my 401(k) intact as long as possible so that it can continue to earn.

Answer: Since you don't have to start tapping this money any time soon, you're in a good position to ride out this bronco of a stock market.

But you would benefit from a session or two with a fee-only financial planner who can look over your investments and make sure you're properly diversified for this time in your life. The planner may well recommend that you change your asset allocation -- how your money is distributed among stocks, bonds and cash -- so that the cash you want is there when you need it.

You can get referrals to fee-only financial planners from the National Assn. of Personal Financial Advisors at www.napfa.org and from the Garrett Planning Network at www.garrettplanningnetwork.com.

Getting loans to appear on record

Dear Liz: You recently discussed the hazards of payday loans. I have a slightly different issue. After a tax problem snowballed, I "solved" my problem with payday loans. I then spent four years working two jobs in an attempt to pay off the loans. I finally took out two installment loans from payday lenders, but those debts aren't being reported to the credit bureaus. I have a perfect payment history with each loan, and I was hoping that despite the nature of these loans, the fact that I was a good payer would help rebuild my credit. Can I get these loans to reflect on my credit report? Will they help increase my score?

Answer: You can't force lenders to report your loans to the credit bureaus. Subprime lenders can be particularly reluctant to do so, since their competitors might be able to spot -- and take away -- their best customers.

Chalk this up to another lesson learned. Get the loans paid off as quickly as possible, build yourself an emergency fund and then look for other ways to burnish your credit.

Liz Pulliam Weston is the author of the new book "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life." Questions for possible inclusion in her column may be sent to 3940 Laurel Canyon Blvd., No. 238, Studio City, CA 91604, or via the "Contact Liz" form at www.asklizweston.com. Distributed by No More Red Inc.