Financial Q&A: Why creditors are watching all of your accounts

Submit your question to Steve Dinnen at: money@csmonitor.com

from the September 8, 2008 edition

Q: I have three credit cards and missed a few payments on one of them. Are the other two creditors allowed to raise my interest rate or penalize me in any way?

J.K., Susanville, Calif.

A: This issue arises because of the "universal default" clause found in some credit-card agreements, says Jeremy Portnoff, a fee-only financial planner in Westfield, N.J. Check the fine print, he says, and you may uncover something similar to this: "If the cardholder is reported as delinquent on an account with any other creditor, we may increase the APR [annual percentage rate] on your account up to the maximum default APR."

If your agreement has this clause, then the issuer can raise your rate if you're late with another creditor, says Mr. Portnoff. Another factor that can increase rates on other cards is a sudden drop in your credit score. Banks monitor people's credit for any excuse to charge more interest, Portnoff says. If your credit is good, look for another card that doesn't have this clause, he says.

Q: I want to build a simple home. Is this a bad time? How much should a contractor make on a $70,000 home?

E.G., via e-mail

A: It might be a good time to build a home because the market is slow, and a lot of contractors are eager for work. But given the cost of labor and materials, it will be tough to find a qualified contractor to take on a relatively small project, says Bedda D'Angelo, a fee-only financial planner in Durham, N.C. A contractor should be able to make a net profit of at least $15,000 to $20,000. Have you considered a pre-fab home? They can be cheaper to build.