Dear Liz: I have little to no information — good or bad — in my credit reports. I am considering obtaining a secured loan from my credit union to establish better credit. Does it make any difference to my credit score if the credit union reports the loan as "secured"?
Answer: Credit scores don't treat installment loans differently based on whether they're unsecured, with just your promise to repay, or secured, which means backed by an asset such as an amount on deposit with the credit union.
What matters is how you pay off the loan (every payment should be on time) and whether the account will be reported to all three credit bureaus, so that you're building scores at all three. Call and ask, because not all credit unions report to all three bureaus.
You also might want to consider a secured credit card, because having both types of credit accounts — installment and revolving — can boost your scores. Again, it's important that you pay on time and that the card is reported to all three bureaus. You should use the card lightly but regularly and pay the balance in full each month for best results.
Saving and investing for a child
Dear Liz: I recently got a court judgment for my daughter's father to pay me child support. She is 1 year old, and it will be about $1,500 a month. I would like this money to be a gift for her when she is older. I'm told not to put it in her name now, as it may hurt her chance for financial aid for college later. How do you recommend I save and invest it for her? I'd like her to have it when she is a young adult.
Answer: This could be quite a gift for a young woman. If the money earned a 5% average annual return over time, you could be presenting her with a check for half a million dollars.
Consider putting at least some of the money in a 529 college savings plan. Withdrawals from these plans are tax-free when used to pay qualified college expenses. College savings plans receive favorable treatment in financial aid formulas because they're considered an asset of the contributor (typically the parent), rather than the child.
Getting rid of robocalls
Dear Liz: We're getting daily robocalls from collection agencies attempting to collect debts from people with names similar to our own. Generally we ignore the calls on the advice of a friend whose mother died heavily in debt and who said nothing can be gained from a conversation with Repo Man. Is that good advice?
Answer: Ignoring debt collectors isn't always the best advice — but in this case, it is. Using autodialers and pre-recorded messages is a hallmark of scammers hoping to scare people into paying debts that aren't theirs.
Another good option is signing up for a free service such as NoMoRobo, which detects many scam calls at the first ring and hangs up on them.
Social Security survivor's benefits
Dear Liz: I became a widow in my 40s. My children collected Social Security until reaching age 18. At age 60, I started collecting survivor's benefits. Now that I'm 65, do I need to do anything to collect my late husband's full Social Security amount at age 66?
Answer: Starting early means you won't get his full Social Security benefit.
Survivor's benefits are based on what your husband would have received at his full retirement age if he hadn't started benefits when he died, or what he actually received if he had started benefits.
His benefit was reduced to reflect your early start, however. Only by starting at your own full retirement age of 66 would you have received 100% of his benefit.
Starting early with survivor's benefits can be a good option if you had a solid work history and your own benefit eventually will be larger than the survivor's benefit. If that's the case, you can leave your own benefit to grow until it maxes out at age 70 while still receiving Social Security checks. If your own benefit won't be larger, though, it may have been smarter to wait.