Money Management

Payment history is the most heavily weighted factor in your credit score. Learn how missing a payment can impact your credit. 

Your payment history has a big impact on your credit score. In fact, it’s the most heavily weighted scoring criteria. So if you miss a payment, it’s natural to worry about what’s going to happen to your credit score.

The first time I ever missed a credit card payment, I remember how stressed I was. Had I just thrown years of building my credit down the drain? Fortunately, it doesn’t work like that.

Payments that are fewer than 30 days late don’t hurt your credit score

When you first miss a payment, here’s what’s going to happen to your credit score: absolutely nothing. For the first 29 days, there will be zero impact to your credit score.

This may be hard to believe. It’s because of how creditors, such as credit card companies and lenders, report account data. Every month, your creditors report the status of your accounts to the three credit bureaus (Equifax, Experian, and TransUnion). Based on this and other information, the credit bureaus each calculate a credit score for you.

Here’s how creditors can report your active accounts:

Pays as agreed30 days past due60 days past due90 days past dueEtc., up to 180 days past due

Payments that are less than 30 days late fall into the “pays as agreed” status. It doesn’t matter if you make a payment that’s one day late, 15 days late, or 29 days late. Your payment is still technically considered on time, as far as the companies that calculate your credit score are concerned.

The fact that there’s zero impact to your credit score doesn’t mean there are zero consequences. The creditor can charge you a late fee as soon as your payment is late. Your unpaid balance will also incur interest charges. But you don’t need to worry about your credit score — if you pay before your account is 30 days past due.

Payments that are late by 30 days or more can seriously damage your credit score

If you don’t make your payment for 30 days, then the creditor can report it to the credit bureaus. It will report your account’s status as 30 days past due, and this could have a severe impact on your credit score.

The exact impact varies from consumer to consumer. As a general rule, the higher your credit score is, the more it will drop. For example, if you had a credit score of 780 with no late payments, it could drop by 110 points from missing one payment by 30 days.

It also depends on how late your payment is. A 60-day late payment does more damage than a 30-day late payment. According to data from FICO, missing a payment by 90 days could cause your credit score to drop by as much as 180 points.

Consumers with lower credit scores won’t see as much of an impact. For example, if you have a 610 credit score with previous delinquencies, a 30-day late payment may take off 20 to 30 points. Although it won’t be nearly as damaging, it still makes it harder to build your credit.

Take care of your credit by paying on time

Your credit score is fragile. While it’s not too hard to build a good credit score, one late payment can wipe out months or years or progress. You could go from qualifying for all the best credit cards to being eligible for none of them.

The best thing you can do is always pay your bills on time. This way, you avoid late fees. It’s also a good idea to pay credit card bills in full every month, because then you won’t be charged interest. If you ever miss a payment, it’s not the end of the world. The creditor may even waive the late fee if you call and ask. Just make sure you get caught up in less than 30 days so you can avoid a big hit to your credit score.

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Need seasonal help this year? Read on to see what questions to ask applicants. 

If you’re planning to hire seasonal help in the coming weeks to aid with the holiday rush, you’re not alone. U.S. businesses are expected to hire 410,000 seasonal employees this year, according to outplacement services firm Challenger, Gray & Christmas.

But if you’re going to bring in extra help to assist with the holiday rush, it’s important to find the right hires. After all, you’re going to tap your bank account to pay them, and you’re going to invest time in training them. You don’t want to hire the wrong candidate only to have to scramble to find someone new at a time when business is at its busiest. Here are some interview questions worth asking.

1. Why are you seeking seasonal work?

You may have an applicant who’s looking for seasonal work because they’re not sure what sort of job they want and are testing the waters. Or perhaps you have a candidate who’s in limbo due to going back to school or an upcoming move.

It may be helpful to know off the bat if there’s a chance that a given seasonal hire has the potential to become a long-term employee or not. So it’s good to try to understand why your candidates are seeking seasonal work as opposed to a permanent position.

Keep in mind that some people might tell you they’re looking for seasonal work simply to boost their savings account balance or scrounge up more cash for the holidays. That’s not necessarily a reason not to hire someone — and you should appreciate anyone who’s honest about their motivation.

2. What’s your availability and how flexible is your schedule?

You’ll clearly need to make sure anyone you’re considering hiring is available when you need them to be. But also, ask about flexibility.

During the holidays, you might get slammed with business, and you may need to call in workers for extra shifts at a moment’s notice. You’ll want someone who can potentially accommodate those requests.

3. What experience do you have in a similar role?

You may not be able to find applicants who have direct experience for the job you’re looking to fill. For example, let’s say you own a stationery store. You may not find too many applicants who have worked in that exact retail situation.

But, if you find someone with experience at a home goods store, certain aspects of that role could easily translate to your own shop. Be open to tangential experience if you’re not finding the exact experience you want.

4. What experience do you have working under pressure?

Holiday shoppers are often pressed for time and limited in patience. After all, stores are crowded and there’s a lot of pressure to spend money, which can create a stressful atmosphere.

As such, working a seasonal gig could mean being exposed to angry customers, long lines, and constant demands. You’ll want to make sure anyone you hire isn’t going to simply crack under pressure. Ask about ways they’ve handled stressful situations before and inquire about coping strategies they know how to employ during those difficult shifts.

If you’re bringing in seasonal help, it’s important to find the right people for the job. Asking these questions could help you narrow down your applicants and, ideally, find employees who are a solid fit.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Getting out from under a mortgage loan sooner might seem like a good idea, but the reality is that it’s often not a smart financial move. Find out why. 

When you buy a home, you’ll likely get a mortgage to do it. Some home buyers don’t like having this mortgage because it makes them feel like the bank is the real owner of their house — or because they just don’t want to be in debt and have monthly payments to make. As a result, they may be interested in early mortgage payoff.

While repaying your mortgage loan ahead of schedule may seem like a good idea, the reality is that it’s often not the best decision financially. In fact, there are three big reasons why early mortgage payoff just doesn’t pay.

1. Your return on investment is probably pretty low

While mortgage rates are currently hovering around 7% to 8%, this is much higher than they have been in years. In fact, many people who borrowed to buy a home have rates in the 3% to 5% range.

When you pay off your mortgage early, your return on investment is the interest saved — so, it’s equal to whatever your interest rate is. If your return is around 3% to 5%, that’s well below the return you could earn by investing in the stock market. In fact, the S&P 500 — a pretty safe investment — has produced average annual returns of 10% for decades.

Why earn 3%, 4%, 5% or even 8% by repaying your mortgage early when you could get a 10% ROI by just making your payments as scheduled and investing the difference?

2. You’ll be tying up money in an illiquid asset

When you pay off your mortgage early, there’s another big downside: You’re tying up your money in your house. You can’t easily access the extra funds you have paid toward your home. If you wanted to get that money back out — say because you needed it to cover an emergency or a big expense — you would have to go through the process of getting a home equity loan or you would have to sell the house. Neither of these are quick or cheap.

By contrast, if you don’t pay your mortgage early and invest instead, you can sell your stocks whenever you want or need to so you keep your money accessible.

3. You can pay back your mortgage with money that’s worth less due to inflation

If you have a fixed-rate mortgage, your interest rate is going to be the same for the life of your loan. But the value of your money decreases over time. This means all of your future mortgage payments are less expensive than the payments you’re making today.

Since you’ll have a mortgage for a long time, the payments you’ll be making decades from now will be made with money that has much less buying power. Let’s say your mortgage payment today, in 2023, is $1,500. In 2043, that $1,500 would only buy you the equivalent of $915 in today’s dollars (assuming a 2.5% annual rate of inflation). So your mortgage payment will essentially cost you just $915 in the future instead of $1,500.

Since you effectively get a discount on your mortgage due to inflation, there’s very little reason to squander that savings by paying your mortgage lender back early.

For all of these reasons, it simply doesn’t make sense to pay off your mortgage ahead of schedule. Keep making your payments as planned and invest extra funds you have, and you’ll end up a lot better off in the long run.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Certain financial mistakes can have reaching consequences. Read on to learn about three worth avoiding. 

When it comes to financial matters, sometimes, the most we can do is do the best we can given our circumstances and knowledge. But unfortunately, financial literacy isn’t something that’s widely taught in the U.S., so you might end up falling victim to a financial blunder due to simply not knowing better.

The harsh reality is that certain financial mistakes are harder to recover from than others. But here are a few mistakes that might haunt you for years.

1. Racking up credit card debt

You may be inclined to charge an extra expense on your credit card here and there when you don’t have the cash to cover it. But over time, those expenses could add up. And if they add up to a larger balance you’re then forced to carry for years, it could do a number on your finances.

Let’s say you wind up with a $5,000 credit card balance that takes you five years to repay. At 20% interest, you’re looking at spending almost $2,950 on interest alone by virtue of carrying a balance all that time.

Plus, if you end up with a large credit card balance relative to your total spending limit, it could result in credit score damage — even if you’re making your minimum monthly payments on time. And that could make it costlier to get a loan when you need one. So your best bet is really to try to pay off your credit cards in full every month — even if you occasionally have to pick up a side gig to drum up the money.

2. Delaying IRA contributions

You may not feel inclined to contribute money to an IRA when retirement is many years away. But if you delay those contributions, you might end up with a much smaller balance.

The stock market’s average annual return over the past 50 years has been 10%, as measured by the S&P 500. If you put $3,000 into your IRA at age 22, it will grow to about $129,000 by age 67 if your IRA delivers an average annual 10% return, too. If you wait 10 years to make that $3,000 contribution, you’ll be looking at closer to $84,000 instead, assuming that same return.

If you have the ability to contribute to an IRA sooner rather than later, don’t wait. Even a modest contribution in your early 20s could grow into quite a substantial amount by your 60s.

3. Buying an expensive car

Some people drive their cars every day. So you may be inclined to pay up for a car because it’s something you’ll get a lot of use from.

But remember, buying a pricey car won’t just mean having a larger auto loan payment. It might also mean paying a premium for everything from car insurance to maintenance.

Meanwhile, your car is something you might keep for years. But what if your financial situation changes? What if you move or have kids, and your bills go up because of that? Suddenly, the higher expenses associated with owning your car might come back to bite you, even if your vehicle is already paid off.

Before you choose to buy an expensive car, think about the long-term repercussions. And consider a less-expensive alternative that still does a good job of getting you around town.

Sometimes, a seemingly innocent decision on your part can end up having consequences that aren’t so great. So be careful with credit card debt and pricey vehicles, and do your best to sneak some money into your retirement account as soon as you can.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Getting homeowners insurance is an important step on the road to buying a home. Find out the most important considerations to make when you pick a policy. 

Anyone who is buying a house needs to have a homeowners insurance policy. Lenders require this, and even cash buyers will want coverage so they don’t have to pay for repairs or replacement of their home out of their bank account if disaster strikes.

It can be confusing to buy homeowners insurance, though, as there are many different companies out there offering policies. For those getting coverage in place for the first time, here’s what to look for to ensure the right protections are put in place.

What types of incidents does the policy cover?

The first thing you’ll want to find out is what kinds of incidents would be covered. Policies are typically divided into two types:

Named peril policies: These cover only incidents named in the policy, such as fires, explosions, vandalism, or falling objects.Open peril policies: These cover everything that is not specifically excluded. Common exclusions include flood damage and routine wear and tear.

In general, most policies — regardless of whether they are named peril policies or open peril policies — provide coverage for:

LightningWindstormsFireSmoke damageFalling objectsExplosionsDamage from aircraftsBurst pipesVandalismTheft

And most policies exclude coverage for flood damage, as well as for other specific risks that are especially likely to occur in certain areas such as mudslides, earthquakes, or wildfires.

Homeowners can read their policies to find out exactly what is covered. When certain risks are excluded, such as floods or earthquakes, buying a separate policy to cover these potential sources of loss is usually a good idea.

What types of losses are covered?

It’s also important to understand the kinds of losses that are covered. Typically, homeowners will want to make sure they have the following kinds of coverage:

Liability coverage to pay for damages caused to others, if someone is injured at the homeDwelling coverage to pay to repair or replace the housePersonal property coverage to pay for repairing or replacing personal property

Other add-ons, such as loss of use coverage, can be a good idea, too. This would pay for additional living expenses if a covered loss occurs and the property owners can’t live in the home while repairs are being made.

Homeowners should review their policies and make sure they have chosen comprehensive coverage. If there are any losses they couldn’t afford to pay for out of pocket if something went wrong at home, they should insure against them.

How much are the monthly premiums?

The average monthly cost of homeowners insurance is $2,305. But insurance premiums vary based on location and the house’s condition and value. To find the most affordable premiums, homeowners should get quotes from several home insurers.

Many insurers make it easy to get quotes online. Independent insurance agents also work with multiple companies and can help homeowners find the cheapest policies.

What is the insurer’s reputation?

Finally, homeowners want to make sure the insurer will actually be fair and pay them promptly if a covered disaster happens. To find out if an insurer has a good reputation, homeowners can review the J.D. Power Home Insurance Study to see how customers rate different insurers. The National Association of Insurance Commissioners also maintains a complaint database homeowners can review.

By considering these factors when buying coverage, homeowners can make sure they have the right insurance to protect their finances.

Our picks for best homeowners insurance companies

There are many homeowners insurance companies to choose from. We’ve researched dozens of options and short-listed our favorites here. Looking for a green build discount or easy bundle policies? Want an easy-to-use interface? Read our free expert review and get a quote today.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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