QUESTION: Last year my husband cosigned a loan for his 18-year-old daughter. She is now more than 120 days late on the payment, and it looks as if we will have to pay it instead. Will her late payment affect our credit report? Will we be able to deduct our loss (about $2,500) on our tax return? ..MR0-

MARYANNE FRAWLEY, AMERY, WIS.

As for what effect this will have on your future, a 120-day delinquency can’t be good. You will almost certainly not be granted a credit card with a low interest rate, no matter how spotless all the rest of your record is. Card applications are checked by computer, and there’s no soul in that machine. You should still qualify for a high-rate card, but only if you start repaying this debt right now. If you let the lender write it off, you’ll be left in credit hell–even if you eventually pay in full.

Call all three major credit bureaus to arrange to put an explanation in your file. TRW (800-422-4879) and Equifax (800-685-5000) make it simple; their reps will tell you how to put a statement in. Trans Union (316-636-6110) makes you jump through hoops: you have to order your credit file for $8 and formally dispute the loan’s late-payment record. Then you can enter your side of the story.

The statement won’t help you with credit cards. But if you apply for a mortgage or a personal loan, the lender will see the explanation and give you a chance to make your case.

Consumer alert: NEWSWEEK called Trans Union seven times to ask how to put a statement in a credit file. We were disconnected twice; got someone who said she didn’t know; got a callback from ““information services’’ with what turned out to be wrong information; twice sat on hold until we yawned and hung up, and finally abandoned the effort. We got the answer from public relations. We can’t imagine how real customers get through. ..CN.-. . . ..MR.-

QUESTION: In 1982 my wife opened an Individual Retirement Account at the Dauphin Deposit Bank and Trust Co. of Harrisburg, Pa. It was an 18-month CD, automatically renewable at a guaranteed rate of at least 10 percent with the right to add money at any time. For years the bank has been trying (and failing) to get out of its contract. In 1994 it brought a class action against the 4,500 accountholders, my wife included, to force them to give up their IRAs. The lawyers agreed to a settlement that lets Dauphin out of its contract with us. Do you call that fair?

JAY SIMMONS, LANCASTER, PA.

Miraculously, the scoreboard reads: Depositors: 1, Dauphin Deposit: 0. In an unusual move, state court Judge Kevin Hess threw the settlement out, effectively saying that it did the depositors wrong. They had crowded into his courtroom to argue against the plan–a principled objection, en masse, that Hess called ““unique in [my] experience on the bench.''

The depositors’ lawyer, Christopher Conner of Mette, Evans & Woodside, says the settlement looked like the best he could do at the time. He has since revised his view. Dauphin Deposit has appealed, so you may still be stuck. But the judge thinks you have a reasonable case. A deal ought to be a deal, for banks as well as the rest of us. ..CN.-. . . ..MR.-

QUESTION: I have $31,000 in Series EE Savings Bonds that mature in October. They’ve been yielding a handsome 7.5 percent, but now they’ll revert to 4 percent. I’m retired and need income, so for safety I’m thinking of switching to Series HH bonds, even though they pay only 4 percent. By switching, I also preserve the tax deferral on the EE bond interest. Is there a better option? ..MR0-

CAROL PATTERSON, HARTFORD, CONN.

Your best choice, he says, is to cash in the EE bonds, pay the tax and buy U.S. Treasury bonds. A 20-year Treasury will pay you an annual income of roughly $2,020 a year. After 20 years, you’ll still have about $29,000 in principal. (To keep your tax in the 15 percent bracket, you might have to cash in half your bonds this year and half next year–say, in December and January.)

Next best is to keep your EE bonds, cashing in $2,020 worth every year (the same income the Treasury bonds would pay). After 20 years (assuming a modest rise in rates), you might have around $15,400 left. At final maturity, about half of the value of your remaining bonds will be taxed as deferred EE-bond interest.

The worst choice is the HH-bond switch. You’d get only $1,240 annually for the first 10 years, with no guarantee of improvement in the next 10 years. After 20 years you’d have $31,000 left, about half of which is taxable interest. That’s less income and less principal, after tax, than the other options pay.

This analysis works for people in the 15, 28 and 33 percent federal brackets (there’s no state or local tax). In the 39.6 percent bracket, however, it’s smarter to keep the EE bonds and cash in some of them every year.

Send your questions to Jane Bryant Quinn, NEWSWEEK Focus: On Your Money, 251 West 57th St., New York, NY 10019. Letters can be answered only in the column.