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Ken and Daria Dolan, America's First Family of Personal Finance, answer your money questions every Friday.

Dear Ken and Daria,

I realize it's important to stay up-to-date on your credit score, but is it necessary to pay for a credit monitoring service?

Jeff

Want to learn more about protecting and improving your credit score? Visit our Credit Center at Dolans.com.

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Ken and Daria Dolan, America's First Family of Personal Finance, answer your money questions every Friday.

Dear Ken and Daria,

My husband and I have $7,000 in credit card debt. Should we take out a home equity loan?

Lyndajoy

Ken and Daria Dolan offer advice on all of your debt concerns at their Credit Resource Center.

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Ken and Daria Dolan, America's First Family of Personal Finance, answer your money questions every Friday.

Dear Ken and Daria,

There is a lot of controversy over closing credit card accounts after the balance is paid. What should I do?

Alethea

Ken and Daria Dolan offer advice on all of your credit questions and concerns at Dolans.com.

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Ken and Daria Dolan, America's First Family of Personal Finance, answer your money questions every Friday.

Dear Ken and Daria ,

I want to bypass my husband in my will (with his permission!) to leave everything to my three children. Can I write a will myself? Can I change it?

Darlene

Ken and Daria Dolan offer advice on all of your estate planning questions and concerns at Dolans.com.

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Ken and Daria Dolan, America's First Family of Personal Finance, answer your money questions every Friday.

Dear Ken and Daria,

Without our knowledge, our 23-year-old daughter ran up $5,000 worth of credit card debt on three different cards. She defaulted and now the collection agencies are coming after my wife and me. We could pay the debt off, but does it make sense to do that?

Jay

Ken and Daria Dolan offer advice on all of your credit card and debt management concerns at Dolans.com.

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Ken and Daria Dolan, America's First Family of Personal Finance, answer your money questions every Friday.

Dear Ken and Daria,

I have a 30-year mortgage. Am I better off paying ahead on it or taking that money and investing it for a higher return?

Richard

Ken and Daria Dolan offer advice from mortgages to debt management to insurance at Dolans.com.

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Time banking is a must do for anyone interested in doing good and saving money at the same time.

Time banks ask their members to provide services to their community neighbors, in return for Time Dollars. Those Time Dollars can then be spent on a service that you would like to have. The services range from giving someone a ride to the airport to cooking dinner for a family whose parents work late, but all services offered depend on who is a part of the time bank and what they have to offer.

A Time Dollar is basically equal to an hour's worth of work. If you do community service for the time bank for an hour, you then receive one Time Dollar and can then use that Time Dollar to "purchase" an hour's worth of work.

Local businesses are also getting on the time banking train. Loretta Bega is a member of a Pennsylvania based time bank and says that she was able to use her Time Dollars to get tickets to the symphony. I spoke with Loretta for an article I wrote on Mainstreet.com and she said her trip to the symphony was all made possible because they are also a member of her time bank. Volunteers stuff envelopes and act as ushers for the symphony and in return the symphony donates tickets to the time bank.

Business aren't only getting in on the act by volunteering donations to their local time bank. Many are beginning to offer discounts to anyone who is a member. The Visiting Nurse Services of New York Community Connections TimeBank in Upper Manhattan has more than 80 business partners as a part of its time bank, and every one offers something of value to their members. Discounter COSTCO offers a two for the price of one membership deal, CitiBank makes time bank members eligible for special checking accounts with no minimum balances, free international wire transfers, free financial reviews and a $500 discount on first mortgage closing costs. Enterprise Rent-A-Car offers 10% off all car rentals. And that's just for example. Time Banks are a growing trend.

To read more about how TimeBanks came to be, check out my related story.

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With the Federal Reserve aggressively cutting interest rates, you may be wondering if it's time to refinance your current mortgage. The answer is a simple yes. Back in January I locked in a 4.5% 15-year fixed rate mortgage the day after the Fed rate cut. Rates went back up to 5.5% within a week.

Generally you will benefit from a refinance as long as your interest rate will go down by at least 1% and the new loan does not require you to pay points in order to get that lowered rate. In most cases, a refinance is only worth it if you plan to stay in the home for more than three years. If you think you'll be selling the home before that, the costs of a refinance probably won't be recovered unless you can lower your rate by 2% or more.

With interest rates so low, the only kind of mortgage you should consider today is a traditional fixed-rate mortgage. Lock in those low rates. Don't play games with variable rates. If you can't afford the payment on a 30-year fixed-rate, consider a 40- or 50-year mortgage rather than a variable rate mortgage. You can always make extra principal payments when you can afford them to shorten the life of the loan in the future. But, of course, be sure your loan doesn't have any pre-payment penalties. Never accept a mortgage loan with pre-payment penalties. Ask that question when you're shopping for a loan and ask it again before you sign the papers to close the loan. Make sure you see in writing that there are no pre-payment penalties before you close the loan.

Check your credit report and score. Before applying for any new major loan it's a good idea to check your credit report and credit score. If you find any erroneous information on your credit report, clean it up before you start the application process. Cleaning things up as part of the underwriting process will only delay the loan process and could even kill the loan. To get the best rates, your credit score must be 730 or higher. People with this credit score can often get rates below the national average rate you'll see quoted around the Internet. If your score is below 675, you will pay significantly higher rates than you are seeing quoted. People with scores between 620 and 674 generally pay 1.5% to 1.9% higher rates for a mortgage. People with scores between 560 and 619 will find their rates are about 3.8% higher than the national average, if they can find a lender at all in today's tight mortgage market. Below that you'll probably find it almost impossible to get a refinance in today's market. You can use the round robin debt startegy to improve your score quickly.

Start your search for a new loan by contacting your current lender. When I'm considering a refinance, the first call I make is always to my current lender. As long as you've been paying your mortgage on time every month, most lenders want to find a way to keep you as a customer. But don't expect your best deal on your first phone call. Lenders' first offers usually tend to be higher than the final offer you'll get if you shop around. When the Fed cut rates by 0.75% in January, I made a call to my lender that day. My rate was 6.04% on a 15-year loan and I knew I could lower that by at least 1% so it was time to consider the refinance. It worked. I closed on 4.5%, 15-year fixed rate loan earlier this month. You do get your best rate offers on the day of a Fed cut and for one or two days after a Fed cut until the competition sorts itself out. So the window of opportunity is open with the Fed cutting rates by 0.75% again.

Shop for rates. Never accept the first offer you get from your bank. Always shop for rates. I've had a lot of success finding decent offers through Lending Tree over the years. Interestingly the last couple of times I used Lending Tree my bank was one of the five bidding for my business. Once your bank sees you in the bidding war the offers get much better. In today's volatile market, a solid, good paying customer is someone a bank does not want to lose.

Refinance or refinance with cash out. If you have both a mortgage and an equity line, one of your key decisions will be to just refinance your first mortgage or to fold in your equity line and possibly your credit card debt, so you have only one payment. You should avoid paying off credit card debt (which is unsecured) with a secured loan. While a credit card company can never foreclose on your house if you can't pay a bill, a lender holding your mortgage can foreclose on your home. An equity line is different. That too is secured debt, so if you can lower your interest rate on the balance in the equity line, you may want to pay that off as part of the refinance. But, you will get a better interest rate offer with a straight refinance. When you pay off an equity line it's called a refinance with cash out. In my recent attempt to refinance I found the cash out would result in an interest rate of 0.35% to 0.5% higher for the first mortgage. That may not sound like a lot, but over the course of 15 years on a sizable loan it adds up. Since I have so little on my equity line and it's variable rate was pegged to below prime, it made more sense for me just to refinance the first mortgage. So, always be sure to look at the rates for both a straight refinance and a refinance with cash out. Calculate total interest costs of both options. Use this mortgage payment calculator to calculate payments and total interest paid for both refinance options. To get total interest paid click on the link that says "Show/Recalculate Amortization Table." At the bottom of the amortization table, you'll find the total interest for the loan you input.

Let brokers who call discuss various options they offer. Mortgage brokers from each of the banks competing for your business will get very creative to get your business. They only way they make money is when they close the sale. Don't let them talk you into a mortgage you don't understand, but do let them discuss different options for whether or not to refinance or refinance with cash out. They can help you sort out what might be best for you given your current loan situation. By talking with four or five lenders, you can then sort out the information and make the best decision for yourself. Just remember, they are sales people on commission so don't get caught up with a slick talker. Take your time and compare offers.

Compare apples to apples. Before making a decision about a new mortgage, always ask each lender to send a "Good Faith Estimate." While they can fudge the offer by not giving you the total costs of closing, the "Good Faith Estimate" is a federal form that makes them lay it all out on the line. By requiring this form before agreeing to any offer, you will then more easily be able to compare closing costs. In some cases I found the "Good Faith Estimate" of one bank's bottom line looked better, but when I started looking at costs unique to my state (such as tax stamps), the out-of-state lenders had underestimated these costs dramatically making their bottom lines look better. So I knew that closing costs would be about the same in the end for the two or three lenders who gave the best offer.

Call back your current lender. With these offers in hand, I was then able to negotiate with my current lender for a better deal. When I told him the rates I got and reviewed his closing costs in comparison, he then came up with an offer I couldn't refuse. My initial interest rate offer from my bank was for a 4.85% loan with closing costs of $5,900. To keep my business I got an offer of 4.5% as long as I did a straight refinance without a cash out and my closing costs were lowered by $900 to $5,000 because certain costs, such as a reissue of my title insurance, could be cut. So I'm ending up with a 1.54% reduction in the interest rate on my 15-year mortgage. I'll be able to recoup those costs in about two years. You can find out how long it will take you to recoup your refinance costs with this calculator from Lending Tree. The cash I'm saving on my first mortgage will go toward paying my equity line off sooner.

Consider a float down option. Since the Fed may lower rates yet again, it's a good time to consider a float down option. That way you lock in today's low rates, but if rates drop between today and when you close your loan the float down option will allow the lender to unlock the loan, lower the rate and then relock the loan. It costs about 1/2 a point up front, but that is credited toward closing costs. Paying that fee does lock you into the lender. You certainly don't want to lose it by closing the loan with another lender. So be sure you've done your shopping before you agree to a float down option.

Lita Epstein has written more than 20 books including the "Complete Idiot's Guide to Improving Your Credit Score" and "The 250 Questions You Should Ask to Avoid Foreclosure."

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You'll note from my story earlier today that U.S. citizens eligible for the one-time Election Year Rebate Economic Stimulus Rebate will receive this money up to almost two months earlier if they have direct deposit than if it is sent by check. For many who can't afford a checking account or don't choose to have one, the delay is just another hidden cost of attempting to live out of the banking loop.

Perhaps these people are unimportant, or the IRS views this payment as good bait to coerce these people into getting with the documented money flow program. Paying them last seems wrong-headed, as these people are almost guaranteed to put the money into circulation quickly. I wonder if the IRS could have adopted a pre-paid debit card program similar to that announced by the Social Security Administration in January of this year. Such cards would have allowed the IRS to directly distribute funds to those without bank accounts, and given those recipients an easier way to spend their money.

There are other aspects of the rebate that might surprise recipients, such as:

• Those who split their 2006 direct deposit tax refund this year among several accounts will receive a paper check rather than direct deposit.
• Supplemental Security Income (SSI) doesn't count toward eligibility, although Social Security income and veteran's disability does.
• You must file a tax return this year, even if you don't owe any taxes, in order to get your rebate.

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The market mavens this morning are gnashing their collective teeth over the government's bailout of Bear Stearns (yes, that means you and me; look who took on the risk on the company's craptastic mortgage-backed assets). Many are caught between relishing the taste of just desserts for one of Wall Street's bad boys and fear that its bankruptcy would act like a snowball dropped at the high point of a snow field.

The government's largesse, routed through JP Morgan Chase, demonstrates the peculiar nature of large debts, one familiar to many failed small businesses. When you allow a customer's debt to represent too large a percentage of your cash flow, you yield power to him. When he can put you out of business by delaying paying his debt, you are no longer in the position to control your own destiny. He owns you.

Bear Stearns appeared to have reached a similar point, at least in the view of the Fed. Despite being responsible for fouling its own nest, the prospect of BS's bankruptcy caused the Fed to blink. In the short run, investors may be heartened by the rescue. At the same time, I envision corks popping in other investment banks, where the pressure to minimize risk has been alleviated. The line has now been established, I guess; any investment less foolhardy and reckless than those of Bear Stearns now has the government's stamp of approval.

Meanwhile, a few more billion of your public dollars are now backed by subprime loans. This morning, I feel sorry for the suckers of the Nigerian Scam. If they had a few billion at risk, the Loan Arranger, played by Ben Bernanke, might have ridden to their rescue, too.

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