Money Management

Fewer than 1 in 4 Americans have a credit score of 800 or more. Find out how borrowing is different for those who do. 

There are two major credit-scoring models: FICO® Score and VantageScore. According to FICO, the FICO® Score is by far the most commonly used by top lenders, and it’s the score we will discuss here. FICO uses consumer credit data to generate three-digit credit scores, ranging from 300 to 850, with 850 being the best possible score.

Since 2021, the average FICO® Score has been 716, with fewer than 1 in 4 Americans carrying a score of 800 or more. While that might not seem like a big deal, those who hit the 800 mark can enjoy some rather nice perks. Here’s what happens when your credit score sits at 800 or better.

Lenders are far more likely to say yes

Looking at FICO® Scores through the eyes of lenders, it’s easier to understand why scores are so important. No credit reporting system is perfect, but for now, a credit score is the only yardstick lenders have to determine how well a person has managed credit in the past. It’s a fast, easy way to get a snapshot of past financial behavior.

Here’s what each credit score range tells lenders:

Within moments of viewing a credit score, a lender has an idea of how risky it would be to loan you money. A score of 800 or more tells them you’re dedicated to making full, on-time payments. You’re almost guaranteed a positive response whenever you apply for credit.

Your rates will be more tempting

When a lender advertises its “best” interest rate, it should always come with this disclaimer: This low rate is reserved for highly-qualified borrowers. Have a credit score of 800 or more? You are highly qualified.

While it’s possible to have a credit score over 800 yet find yourself in serious financial trouble, lenders believe you’ll still do everything you can to make payments as promised. And it’s all for one simple reason: you’ve proven you’re financially serious. If not, your credit score would not be so high.

When a lender offers you its lowest interest rate, it’s for two reasons. The lender has no reason to believe a loan to you is risky, and it also realizes that you have options. With a credit score like yours, you can borrow from anyone. Whether you’re working with a mortgage lender or borrowing money to buy a car, the lender considers you the “ideal” borrower, and it really wants your business.

With a credit score of 800 or more, you can look at the lowest rate a lender offers and say, “Oh, that’s for me.”

You’re more likely to receive every penny requested

If you’ve ever been in an emergency situation and needed money fast, you may be familiar with how difficult it can be to squeeze dollars from a reluctant lender. It’s different when you have an exceptional credit score. As long as the amount requested won’t drive your overall debt load above the lender’s acceptable level, a lender will likely loan you the amount requested.

You don’t have to stress

A score of 800 or more makes borrowing easier, and it lets you off the hook in terms of fighting to boost your score. Once your credit score hits 800, it’s considered exceptional. A borrower with a score of 805 is treated precisely like a borrower with a perfect score of 850.

Let’s say you have a score of 730. It’s considered “good,” but you want more. It makes sense to take steps to raise your score because you know a higher score will save you money through lower interest rates. The same is not true when you hit 800. While seeing the number 850 associated with your credit score may be fun, there are no related benefits.

Credit scores are like puppies; they’re always moving. No matter how low your score is today, it’s possible to surpass the 800 mark. It takes time and effort, but people do it every day.

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An HSA could serve as your go-to source for healthcare funds. But read on to see why you may want to keep money in regular savings, too. 

No matter your age, healthcare bills can eat into your budget and cause you a world of financial stress. In fact, recent data from the Kaiser Family Foundation found that 1 out of every 10 Americans has medical debt, with millions of people owing more than $10,000.

It’s important to have money set aside to cover medical bills as they arise. That way, you won’t have to rack up costly debt in the course of taking care of your health.

Now, when it comes to socking money away for healthcare, you have choices. You could put cash into a regular savings account and tap it as needed. Or you could fund a health savings account, or HSA, if your health insurance plan renders you eligible for one. This year, for example, your health insurance plan needs to have a minimum individual deductible of $1,500 and a minimum family deductible of $3,000 to qualify.

But what if you’re in the habit of funding an HSA? Do you need money in regular savings on top of that?

The quick answer is that no, you may not need money in the bank for healthcare costs if you have an HSA. But you might want separate savings for one big reason.

When you want to make the most of your HSA

The nice thing about HSAs is that your money never runs out on you, whereas with a flexible spending account (FSA), you’re generally required to spend down your plan balance every year or otherwise risk forfeiting some of those funds. But another way HSAs differ from FSAs is that they allow you to invest money you don’t need to withdraw right away, the same way you can invest funds in a brokerage account or IRA.

In fact, if you avoid tapping your HSA and instead invest your money for many years and allow it to grow, you might get to the point where you have a large sum of cash at your disposal to cover healthcare expenses in retirement, when your medical bills might be a lot higher. So while you can of course tap your HSA as needed to cover healthcare expenses as they arise, you may be better off keeping some money in a regular savings account for near-term medical bills. That way, you’ll have the option to keep your HSA funds invested.

A good plan to have in retirement

Since health issues tend to arise with age, it can be helpful to have HSA funds to tap during retirement. But another good reason to reserve some HSA funds for that period of life is that beginning at age 65, HSA withdrawals can be taken penalty-free even if that money isn’t used for medical spending.

To put it another way, your HSA could serve not only as a source of healthcare funding in retirement, but also, as your back-up IRA or 401(k). So that’s just another reason to keep money in the bank for healthcare expenses, even if you have HSA funds you can withdraw from.

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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.
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The Powerball winner will have to pay federal taxes on their winnings. Learn how much is left after those taxes are taken out. 

The sixth-largest lottery reward in U.S. history ($1.08 billion, or roughly half of the largest lottery reward, $2.04 billion, dished out last November) has a winner. Though the winner’s identity is still a mystery, the winning ticket was sold from a downtown Los Angeles minimart and will make the lucky ticket holder a multimillionaire.

But not a billionaire. No, even though the lottery prize is over a billion dollars, the winner still has to pay taxes on their earnings. In fact, no matter how they choose to receive their prize — either as a lump sum, which yields a pretax total of $558.1 million, or as an annuity with 30 annual payments of roughly $36 million each — the ticket holder will still face a hefty, hefty tax bill. Let’s take a look at how much the Powerball winner gets after taxes.

Powerball winners will face a tax rate of 37%

First, before any taxes are paid, the federal government will withhold 24% of the winner’s earnings. This is not unlike when the IRS withholds money from your paychecks in order to pay your annual federal tax bill.

That means, if the Powerball winner decides to take the lump sum, the IRS would withhold 24% of the $558.1 million, or about $133.9 million, leaving the winner with roughly $424.1 million.

If the winner decided to take the annuity, the annualized federal withholding would be roughly $8.836 million for 30 years, according to the lottery website USAmega.com. In practice, your withholding would fluctuate each year, due to the fact that your annuity payments start low and increase 5% each year to adjust for inflation. But, taken together, your payments would annualize to about that much.

But this is just the winner’s tax withholding, not their actual tax bill. The Powerball winner will still have to pay taxes at their federal tax rate, which will very likely be the top-tier rate, currently 37%. That means, if the winner is single, they would pay 37% on any income above $578,126 and if they’re married it would be income above $693,751. All in all, at a tax rate of 37%, the Powerball winner (who takes the lump sum) would pay about $206 million in taxes and be left with roughly $351 million.

The winner who takes the annuity would net double the lump sum

According to USAmega.com, the winner who takes the annuity would net $22,712,845 per year. After 30 payments, their total net winnings would amount to over $681 million, which is almost double what the lump sum would yield.

Of course, most winners will take the lump sum. Thirty years is a long time to collect your earnings, and besides — you could potentially invest your money in assets that have a higher rate of return, like stocks or S&P 500 index funds. But for those with a longer time horizon — and perhaps a solid plan for their personal finances — the annuity would put more lottery winnings in your pocket.

At the end of the day, the lottery winner will pay hundreds of millions of dollars in taxes, reducing their prize to either $351 million or $681 million. Fortunately, the ticket was bought in California, which doesn’t have state taxes on lottery winnings, but had it been bought in another state, like Maryland, which taxes winnings at 8.95%, the sum would be reduced further. Regardless, it’s still an enormous sum of money and will completely change the life of whoever won.

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Using a personal loan for a car purchase usually doesn’t make sense, as a car loan can offer a lower rate. Here’s what you need to keep in mind. 

The average price of a new car was $48,008 in March 2023, which is a pretty substantial sum of money. Both new and used cars are expensive, and many people need to borrow for them rather than paying for them directly from their savings account.

If you’re borrowing to buy a car, you may be interested in potentially using a personal loan. Personal loans are offered by many banks, brokerage firms, and online lenders. The proceeds from them can be used for anything you want — including a vehicle purchase.

But, does it actually make sense to use a personal loan to fund your new car? Here’s what you need to know to decide.

There’s a better option than buying a car with a personal loan

While personal loans can be a great way to borrow in some circumstances, it typically makes no sense to use one to buy a car. Car loans are specifically designed to get you into a vehicle and they can be a far better choice.

See, car loans are secured by the car, which acts as collateral. A dealer can help you get a car loan or you can apply on your own with a lender of your choosing. Since car loans are secured, they don’t present a whole lot of risk for a lender since the lender could just repossess the car if you stop paying the loan.

Car loans aren’t as risky for lenders, so they are much easier to get approved for — even for people with bad credit in many cases. The interest rate is also pretty low relative to personal loans. The average car loan interest rate in 2022 was 6.07%, for example, while personal loan rates averaged 11.48% as of May 2023.

Since a higher interest rate adds costs, a personal loan would be a more expensive way to borrow for a vehicle than a car loan would — and you might also have a harder time finding a lender to give you a personal loan, compared to getting a car loan.

For both of these reasons, you’re likely better off shopping around for the best car loan you can qualify for — as using a personal loan would be the wrong financial move.

Be smart about how much you borrow for a car

Although a car loan can be more affordable than a personal loan, borrowing for a car can mean making a major financial commitment for years to come. And, since cars go down in value over time, it means paying interest for an asset that becomes worth a little less each day.

Now, you may still need to borrow for a car despite these downsides. Just try to borrow the minimum you need to get a safe vehicle, and choose a car loan with as short of a payoff timeline as you can afford. That way, you’ll keep your car payments reasonable and should have money left over to accomplish other financial goals like saving for your future.

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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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Many small businesses have to close their doors within the first five years. Here are some common reasons companies fail, and tips on how to avoid that happening to you. 

Starting a business can do wonders for your finances, if you are successful. Unfortunately, many small businesses fail. In fact, 20% fail in the first two years; 30% by year three; and 50% by year five, according to Forbes.

There are many reasons why these companies cannot find success, but here are some of the top reasons why businesses don’t end up making it — along with some tips on how to avoid these problems in your own business venture.

1. A lack of market demand

Companies need customers to survive. Without people to buy products or services, a business cannot make any money to fund its business checking account. That’s why it shouldn’t come as a surprise that about half of all companies that fail in the first five years do so because there’s not enough demand for their products or services.

To avoid this, it’s important to do market research before opening a business. Consider who your target customers are going to be, how you can meet their needs in a way competitors can’t, and how you will market to them so they know you are available. Only by doing a significant amount of research into your target market can you determine if there’s enough demand to open your doors.

2. Running out of money

Running short of funds is another common reason for companies to fail, accounting for about 38% of business failures. The problem is, it can take some time for your business to actually start turning a profit. If you do not have enough money coming in, you won’t be able to keep your doors open long enough to actually turn the business into a success.

To avoid this, have a plan for how to fund your business for at least the first year or two even if you don’t start making a lot of money right away. Try to keep your initial overhead costs as low as possible and avoid committing to any large expenses until you start seeing money coming in consistently.

If you can start small and grow your business over time on a shoestring budget, you’re less likely to have to close your doors since you simply can’t keep things going any more.

3. Unsuccessful marketing

If you cannot reach your target audience and convince them to try your product or service, you aren’t going to be successful no matter how great your offerings are. Unfortunately, many companies fail because of unsuccessful marketing efforts.

To make sure this doesn’t happen to you, do some research into who your customer base is and what your competitors are doing. Look at what marketing tactics have worked for others in your industry and develop a detailed, comprehensive marketing plan.

Your marketing plan should include things like a description of your target audience, different strategies you’ll use to reach them such as social media networking, internet marketing, word-of-mouth referrals, blogging, TV or newspaper ads, reaching out to local organizations, or taking another approach you’ve developed.

You should also set a marketing budget, figure out where to allocate your dollars, and define a system for tracking the performance of different marketing efforts to see what pays off for you.

4. Inadequate management

Finally, inadequate management can be a big reason for business failure. That’s because not everyone with a great idea actually knows how to run a business.

Running a company doesn’t just mean selling products or services. You’ll also have to be good at budgeting, marketing, accounting, managing employees, and a whole host of other tasks that may not directly be related to what you’re selling. Consider taking some business courses to learn these skills before getting started, or put together a team of experts who can help with the things you don’t know.

Ideally, by following some of these tips, you can avoid falling victim to these common reasons for business failure and your company will end up a great success. Remember, while many businesses fail, a great many also succeed and go on to change their owner’s lives — and perhaps even to change the world for their customers.

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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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When I tried to pick up my groceries the other day, the Amazon servers were down so I couldn’t get my food. Here’s what happened. 

A few weeks ago, I put together a Whole Foods pickup order. I’ve done this many times before.

It is much more convenient to pick up the food than to go into the store. I get cash back on my credit card for Whole Foods purchases, so that’s a big benefit. And I end up saving money on my purchases when I do grocery pickup since I’m not tempted by all the goodies on the store shelves.

My order had 72 items in it that day, and I was eager to get it loaded in the car and head home. Unfortunately, when I arrived, there was a big problem.

A server issue meant my groceries were not available

On the day that I went to pick up my groceries, it just so happened that Amazon’s servers had gone down. And, because of the way Whole Foods pickup works, this created a few big issues.

The first problem was that the store was not notified I had checked in on my phone app — but I was not told that. So, I ended up sitting in the grocery store parking lot in a pickup spot for about 15 minutes. Finally, a store clerk came out to talk to me because the customer parked next to me had gone in to ask what was going on after waiting for a half-hour in the parking lot.

The next problem was that the store was unable to determine which bags were mine because the servers were down. Which meant that while my groceries were sitting in the pickup area, there was no way to distinguish mine — or anyone else’s. So, the store simply could not give us our groceries.

Not only that, but the store could not tell us when the servers would be back online. And if they didn’t go back on that day, all the food would end up having to just be put back on the shelves. This meant I was left without my 72 items and faced a choice about whether I should go in and try to shop for all of them (without a printed shopping list) or hope the servers came back on and I could come back later to get my groceries.

Fortunately, I was able to go in to talk to customer service and while I was waiting to try to figure out what was going on, someone figured out how to manually match up the bags and get me my groceries. But, this only worked because it was late in the day and there weren’t many pickup orders left. Had I been earlier, I’d have had to leave without my groceries or shop for them all again.

Grocery pickup (and delivery) can present some risks

The fact is, when you rely on technology, there is an increased chance of problems. This doesn’t mean that grocery pickup isn’t worth using. You just have to be prepared for some potential snafus and have a back-up plan if technology lets you down.

For me, personally, I’ll no longer be doing pickup for groceries I need that very night — and I’ll also have a list with me as backup just in case things don’t work out and I end up having to do my shopping myself.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.

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