YOUR MONEY
CREDIT, COLLEGE, TAXES AND REAL ESTATE
PRINT
EMAIL
DEL.ICIO.US
DIGG THIS
I recently received my credit report and was astonished to find that my AT&T Universal MasterCard had 21 account-review inquiries from the card issuer, almost monthly for two years. I have had this card since 1991 without late payments or credit problems. Is the number of inquiries unusual? Will it affect my credit score? -- James L. Schultz, via e-mail
Make room for Big Brother. It's common practice for card issuers -- in your case, Citibank -- to keep tabs on their account holders every month. "We use the information to increase or decrease a credit line, or to make customers a balance-transfer offer," says Citigroup spokesman Samuel Wang.
But the motives of card issuers aren't always so benign. Some check your report frequently so that they can raise your interest rate if you're late with a payment on another card, a practice called universal default. Citibank called a halt to universal default in March, just before congressional hearings in which senators grilled bank executives about credit-card fees. But Citibank will still review your credit record when adjusting your credit limits and other terms.
The good news is that those account reviews won't affect your credit score. When prospective lenders pull your credit report, they see a version that's limited to inquiries made when you actually apply for a loan, a mortgage or other credit. Those applications can affect your credit score if it looks as if you're taking on too many new obligations.
When you check your own credit report, you'll see many other types of inquiries, such as account reviews by your lenders, potential employers and even yourself. But those inquiries don't affect your credit score, either.
Whither interest rates?
I am considering putting some extra cash in a money-market fund, a short-term bond fund, a high-yield fund or a medium-term bond fund. But I'm concerned about loss of capital if interest rates rise. I also wonder how long I can expect money funds to yield 5% or so, when they have paid much less in the past. What should I do? -- Ron Ostmann, Cincinnati
Yes, money funds have paid less in the past. For example, rates fell below 1% earlier this decade. But they've also paid a lot more. In 1981, the typical money fund returned about 17%.
Don't look for either extreme anytime soon. Returns on money-market funds are linked to moves in short-term interest rates. The Federal Reserve has left those rates unchanged for 11 consecutive months, and this could continue. If inflation accelerates, the Fed is likely to boost rates; if the economy weakens, the Fed could cut short-term rates.
Long-term interest rates, which are determined by investors buying and selling in the bond market, have been unusually stable over the past couple of years, and we don't expect any big moves. But with long-term rates as low as they are, there is a lot more risk of rates rising (and bond prices falling) than there is of rates falling (and bonds appreciating).
So money-market funds make a lot of sense for cash you can't afford to lose. The only risk is that your income will decline if the Fed cuts short-term rates. If you want to boost your yield without taking on too much additional risk, consider Fidelity Floating Rate High Income (symbol FFRHX), which invests in adjustable-rate bank loans (see The 25 Best Mutual Funds). The fund recently yielded 6.4%.
Stock screens on the Web
Is there a Web site for stock screening that uses Benjamin Graham's value-investing rules? -- R.R., via e-mail
Benjamin Graham, the father of securities analysis, outlined his stock-picking strategies in The Intelligent Investor, published in 1949, and those strategies have been widely disseminated -- including on the Internet -- ever since.
Graham advocated buying a stock at a price well below the company's intrinsic value. His goal was to get a dollar of assets for less than 50 cents. That discount gives investors a margin of safety, which insulates them from the whims of the market.
Plenty of Web sites have screens based on Graham's methods. For example, he prized companies with net cash holdings (cash minus outstanding debt) equal to at least 50% of their stock-market value. Nasdaq's Web site offers a free Graham screener that selects Nasdaq-traded stocks that pass the test.
Reprint Article
|
|
|
|
|
