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Money Management Q&A


Credit checks; real estate "binders," profit-sharing plans

Which inquiries affect your credit?

Last year I applied for two new credit cards and shopped around at several lenders for a car loan. I've also started checking my credit record periodically and it has dropped a bit. I'm sure the new cards had an impact, but what about the inquiries from the lenders and my own credit checks? Could those have affected my rating too, and how long will they stay on my record?

Inquiries made when you apply for credit cards or loans do affect your credit score and tend to remain on your record for at least two years. Those that don't result in additional credit disappear sooner-within a year or so. And when they're made within a short time, such as when you're loan shopping, they're grouped as one less-noteworthy event. Your own inquiries also stay listed for at least a year but have no effect on your credit score, so you can check your own score or sign up for a credit monitoring service without giving potential future creditors cause for concern.

I recently made an offer to buy my first home. The seller accepted my bid and we signed a binder outlining the details of the deal. But the next day the seller accepted a higher bid, saying he didn't have to honor my offer. Can he do that?

Probably. Though the laws governing real estate transactions vary by state, and sometimes even by locality, "binders" often don't bind anyone. Sometimes they contain too few details to be legally enforceable as contracts. According to the American Bar Association, an offer should include the purchase price; the amount the buyer will put down; whether the buyer is applying for a mortgage and, if so, the loan terms; the preferred dates for closing the sale and transferring possession to the buyer; and a list of any appliances, furnishings, and other property included in the sale.

Even documents that do contain sufficient detail can include an escape hatch-a clause stating that both parties will later sign a contract within a specified number of days, for instance, or that either party's attorney can nix the deal within a certain timeframe. If you want to pursue the matter you can have your attorney review the document you signed to evaluate its legal weight, but chances are you're out of luck.

Why your pension plan shouldn't pay expenses

I'm setting up a profit-sharing plan for my practice. Should the related expenses come out of plan assets or should my practice pay them directly?

You can handle it either way, but to maximize the practice's potential contribution to the plan it's best to pay trustee's fees and any other administrative expenses separately. This way you and your employees will get more benefits and the practice will still be able to deduct the costs of administering the plan.

Do you have a money management question that may be stumping other doctors, too? Write: MMQA Editor, Medical Economics, 123 Tice Blvd., Suite 300, Woodcliff Lake, NJ 07677-7664, or send an e-mail to (please include your regular postal address). Sorry, but we're not able to answer readers individually.

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