Money Management

Few consumers have perfect credit, and there’s a reason for that. Read on to learn more. [[{“value”:”

There was actually a point in my life — during my mid-20s — when I had perfect credit. The reason is that I’d always paid my bills on time, I paid off my credit cards every month in full, and I had a long-standing credit card account in my name because my parents had added me as an authorized user when I started college (even though I didn’t actually make charges on that account).

But it’s been a really long time since my credit score was perfect. And I’m totally okay with the fact that it’s not perfect, since that’s really hard to achieve.

Why so few people have perfect credit

An estimated 1.31% of Americans have a perfect 850 credit score. But the reason my and so many people’s credit isn’t perfect is because sometimes, even a seemingly innocent move can cause your score to drop ever so slightly.

There are five main factors that go into calculating your credit score:

Payment history, which speaks to whether you’re timely with bills versus whether you’re late or delinquent.Credit utilization, which measures how much of your revolving credit you’re using at once.Length of credit history, which considers how long you’ve had accounts in good standing.Credit mix, which factors in the different types of credit accounts you have.New credit accounts, which refers to recently opened accounts or recent hard inquiries resulting from new credit applications.

It’s the latter item — new credit accounts — that often causes perfect credit to be out of reach for otherwise financially savvy consumers.

See, any time you apply for a new loan or credit card, the lender or credit card company does a hard inquiry on your credit report. It’s the company’s way of checking up on your finances to make sure you’re trustworthy enough to borrow money.

But every time there’s a hard inquiry on your credit report, your score tends to fall by a few points. So let’s say you have a credit score of 847 because you’ve done a great job of paying bills on time, keeping your credit card balances low, and maintaining long-standing accounts. Let’s say you also have what’s typically deemed a “healthy” credit mix — say, a combination of both installment loans and credit card balances.

That perfect 850 might seem like it’s almost yours. But if you apply for a new credit card, your score might drop from an 847 to an 842 simply because you’ve asked for more credit, putting perfect credit further out of reach. But it’s not as if you’ve done something unreasonable in that situation — you simply tried to take advantage of a good credit card offer.

Don’t sweat it if your credit score isn’t perfect

You could use up a lot of energy trying to attain perfect credit. But don’t.

Honestly, once your score reaches a certain point, the exact number doesn’t matter. If you’re applying for a loan or credit card with a score of 825, you’re pretty much just as likely to get approved with that score as with a perfect 850. So if getting to the point of perfect credit requires you to not apply for any new credit cards or loans for an extended period of time, and that doesn’t work for you financially, why put yourself through the hassle?

Rather than focusing on perfect credit, focus on maintaining great credit or building your credit if you feel it could use work. But continuously pushing for that 850 might mean setting yourself up for frustration and failure.

Our picks for 2024’s best credit cards

Our experts carefully review the most popular offers and select those that are worthy of a spot in your wallet. These standout cards come with fantastic benefits like generous sign-up bonuses, long 0% intro APR periods, and robust rewards.

Click here to learn more about our recommended credit cards

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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Hybrids often cost less up front than EVs and don’t depreciate as quickly. Find out what costs to consider when buying a new car. [[{“value”:”

Buying a new car can be like navigating the back streets of a big city. You’ll have lots of decisions about which direction to take and a bunch of potholes to avoid. If you’re choosing between a hybrid and an electric vehicle, those potholes can be both environmental and financial.

Electric vehicles have no tailpipe emissions. They might qualify for subsidies and cost slightly less to run than a hybrid. But they depreciate quickly and can cost a lot more to buy. On the other hand, hybrids tend to hold their value better and are often more affordable upfront.

There are a lot of moving parts to consider, so let’s dive in to learn why hybrids are sometimes the smarter financial choice.

Hybrids vs. electric vehicles: Weighing the costs

Sales of electric vehicles have grown dramatically in recent years, but consumers continue to be concerned about range and charging networks, amongst other things. Hybrids bridge the gap. They are greener than gas cars and also remove some of the concerns about traveling long distances and finding places to charge.

Traditional hybrids use an electric motor with a gas engine, while plug-in hybrids can be fueled using gas or electricity. As Car and Driver put it, they work as “part-time electric vehicles.” The cost breakdown is different for hybrids, plug-in hybrids, and EVs.

Upfront costs

If you’re trying to choose between a hybrid and an EV, financing deals and tax credits can make a huge difference in the price you’ll pay. On average, electric vehicles are more expensive, but so much depends on what car you buy and what kind of a deal you can get. If an electric vehicle costs $10,000 more than the hybrid you have your eye on, tax credits and other incentives could close that price gap.

Here are some ballpark figures to give you an idea:

Running costs

Last year, the AAA put the average annual cost of owning and operating a new car

at $12,182. That includes depreciation, car financing, fuel, insurance, license, registration, taxes, and maintenance. Electric vehicle owners save money on gas and running costs, but hybrids are cheaper in other areas. Depreciation is so important that it has its very own section below.

Here’s how EVs, hybrids, and gas cars compare:

Car financing: The APRs on some of the best auto loans are around 6% or more. Let’s say you buy an EV that costs $10,000 more than, say, a hybrid, and you borrow that money. If we calculate a loan term of three years, you’d pay $300 a month and almost $1,000 in interest in total. Now, some EVs qualify for green auto loans with better terms. Even so, borrowing to buy a more expensive car will still cost you in interest.Gas costs: SolarReviews estimates electric cars are up to 70% cheaper than a gas car, and hybrids are 60% cheaper at best. Given that the average American family spends $5,000 on gas, per J.D. Power, that’s a potential $3,500 saving for EVs and $3,000 for hybridsInsurance: Auto insurance is higher on hybrids and electric cars than on gas ones. Progressive says this is partly because the cars themselves cost more. The parts can also be more expensive and need specialist mechanics to fix them. Check out some of the best car insurance companies for deals on all types of car insurance.Maintenance: Electric cars come out ahead here. They don’t have a traditional engine, so you can wave goodbye to oil changes, spark plug changes, and more. SolarReviews argues maintenance costs on an EV are $400 to $1,000 less than a gas car. Hybrid maintenance could actually cost more because you’re essentially paying to maintain two engines.

Key takeaway: If you’re calculating the cost of hybrids vs. electric cars, don’t rely on generalized figures. Drill down and compare running costs for the specific models you might buy and your situation.

Depreciation

If there’s one single reason to buy a hybrid over an electric vehicle it is this: Electric vehicles depreciate faster than a speeding train. According to a 2023 report from iSeeCars, on average, EVs lost 49.1% of their value in five years. Hybrids lost just 37.4% in the same period.

If you’re spending, say, $40,000 on a new car, think about how much it might be worth when you want to trade it in. In this scenario, the EV might lose around $4,000 a year, while a hybrid might lose $3,000 — a significant difference.

Bottom line

Electric vehicles aren’t cheap, and EV gas and maintenance savings often won’t be enough to offset the hefty upfront costs. Unless you can get the initial cost down through tax credits, financing deals, and dealer offers, hybrids will often be the smarter financial choice.

Electric vehicles may make sense if:

You can pay for the car out of pocketYou’re willing to pay more for the environmental benefitsYou’re buying a make and model that qualifies for the full federal tax credit

A hybrid may make sense if:

You can’t afford the higher EV price tagYou make a lot of long tripsYou’re worried about depreciation

Our picks for 2024’s best credit cards

Our experts carefully review the most popular offers and select those that are worthy of a spot in your wallet. These standout cards come with fantastic benefits like sign-up bonuses worth $200 or more, 0% intro APR for up to 21 months, and cash back rates up to 5%.

Click here to see our top credit cards

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.Emma Newbery has no position in any of the stocks mentioned. The Motley Fool recommends Progressive. The Motley Fool has a disclosure policy.

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There’s only about a month and a half until the tax deadline. Here’s a three-step process to get your return filed. [[{“value”:”

I totally get why you don’t want to file your taxes this year, but the IRS is kind of insistent about it. If the shiny carrot of a refund isn’t enough to motivate you, there’s always the stick of penalties and jail time. But sometimes, the tedium isn’t the only thing stopping you from filing your return.

Doing your taxes can also be confusing, especially if you’ve never done them before. But fear not. Here’s a simple, three-step process you can use to get yours filed fast.

1. Decide how you’re going to file your taxes

You can file taxes yourself using tax-filing software or you can hand them off to a tax professional to do them for you. Both strategies have their pros and cons. Tax-filing software lets you work on your taxes on your own time, and some people may even be able to file their federal tax return for free. Tax professionals, on the other hand, charge a fee but they know how to ensure your taxes are done right and they’ll spare you the work.

Either way, your first step is research. If you’re going with tax software, investigate your options. Most companies have several packages with different services and prices. Some now enable you to speak to a tax professional online if questions come up while you’re filing your return, but this costs extra. Think about the features that matter most to you and compare prices across a few providers before deciding which to use.

When looking for a tax professional, start by checking the IRS’s Directory of Federal Tax Return Preparers. This isn’t an exhaustive list of all tax preparers in your area, but it does contain some of the best. Choose a few and give them a call to discuss your needs. Keep in mind that some may not be taking any more clients for the season at this point. Be sure to ask about the cost and how long it will take to file your return before choosing one.

2. Gather your documents

The next step is to gather all your tax documents in one place. What you’ll need is unique to you, but some common items include:

W-2s1099s for self-employed workers and contractorsMortgage loan interest statementsProperty tax formsDocumentation for retirement account contributionsDetails of estimated taxes paid, if self-employed

You also need documentation for any tax breaks you plan to claim. For example, if you plan to write off a computer you purchased for your startup as a business expense, you need a receipt for the purchase. Or if you’re claiming a tax credit for higher education expenses paid during the year, you’ll need proof of how much you paid.

Gather all of it together in one place and find a folder or envelope to keep it in. You’ll need to hold onto your tax documentation even after submitting your return. You should keep all tax-related documents for at least three years, according to the IRS, and you may want to hold onto them even longer in some cases.

3. File your taxes

If you’re handing off your taxes to someone else, this step is pretty simple. Hand over all your documents and wait for the call saying your return is done.

When you’re doing your own taxes, it’s a little more complicated, but don’t panic. Most tax software these days will ask you simple questions to guide you through your return. They also have help documentation if you’re not sure what you’re supposed to do at a specific step. Just take your time.

When you’re all done, whether you filed taxes yourself or not, give your return a quick review to make sure everything looks alright. Then, you can file them. E-filing is easiest for most people and it’ll help you get your refund the quickest, if you’re eligible for one. But you can also file a paper return if you’re more comfortable doing this.

If you qualify for a refund, you can track it using the Where’s My Refund tool. It should take a few weeks to arrive after the IRS receives your return.

Those who owe the IRS can either write a check and mail it in if they have the cash on hand or explore payment plan options. You can also make an offer in compromise, where you tell the IRS what you can pay. If it agrees, it’ll forgive the remainder of your tax bill.

If you take things one step at a time, you should be able to file your taxes in three days. And if you need a little more than that, that’s OK. Just keep in mind that the tax deadline is April 15, 2024, so you don’t want to put it off for too much longer.

Our picks for 2024’s best credit cards

Our experts carefully review the most popular offers and select those that are worthy of a spot in your wallet. These standout cards come with fantastic benefits like sign-up bonuses worth $200 or more, 0% intro APR for up to 21 months, and cash back rates up to 5%.

Click here to see our top credit cards

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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The IRS offers several tax credits to parents with minor children. Here are five of the most valuable you should know about. [[{“value”:”

As a mother of two, I know kids can be expensive. But come tax time, they can also bring you some huge savings. Several tax breaks are specifically geared at children and families that can help you reduce your taxable income for the year or even reduce your tax bill directly.

But each one has its own requirements you must meet to claim them. Here are five of the most common you may qualify for this year.

1. Child Tax Credit

You get this tax credit for — you guessed it — having children. To qualify, your child must:

Have a valid Social Security numberBe under 17 at the end of the yearBe your biological, adopted, step- or foster child OR a full, half-, or stepsibling OR a descendant of one of theseHave been dependent on you for more than half their income during the tax yearHave lived with you for more than half the yearBe claimed as your dependent on your returnBe a U.S. citizen, U.S. national, or U.S. resident alien

The full credit is worth $2,000 per qualifying child. That’s a dollar-for-dollar reduction of your tax bill. However, those with incomes greater than $200,000 ($400,000 for joint filers) may get a smaller credit or may not qualify for this tax credit at all.

2. Child and Dependent Care Credit

This credit is available to parents who paid for daycare or other child care services throughout the year. You could also claim it if you’re caring for a spouse or parent who is unable to care for themselves.

You’re eligible for this credit if you paid for the expenses of a qualifying individual so you could work or look for work and you lived in the United States for more than half the year.

This credit covers up to 35% of child care expenses for a child under 13, with a maximum credit of $3,000 per child.

3. Adoption Credit

Those who adopted a child in 2023 can claim a tax credit worth up to $14,440 per eligible child. You can use this form to figure out how much your credit is worth.

Only adoptions of children younger than 18 qualify for this credit. And you can only write off qualifying expenses, like reasonable and necessary adoption fees, legal fees, and adoption-related travel expenses.

4. American Opportunity Tax Credit

This tax credit helps parents who are paying for their children’s higher education costs. To qualify, a child must:

Be pursuing a degree or recognized credentialBe enrolled at least half-time for one academic period during the yearNot have finished their first four years of higher education at the beginning of the tax yearNot have claimed this tax credit or the Hope Credit for more than four yearsNot have a felony drug conviction at the end of the tax year

There are also income limits that could reduce the maximum credit you qualify for. You may be ineligible for this credit if your modified adjusted gross income (MAGI) is over $90,000 or over $180,000 for joint filers.

The full credit is worth $2,500 per qualifying student. The IRS credits the first $2,000 you spend on qualified educational expenses at 100% and the next $2,000 at 25%.

5. Lifetime Learning Credit

This is another education-related credit. To qualify, you must have paid for qualifying higher education expenses at an eligible institution during the year for yourself, your spouse, or a dependent claimed on your tax return. The student must be enrolled for at least one academic period during the year.

This credit has the same income limits as the American Opportunity Tax Credit, so it’s not an option for high earners. It’s also worth noting that you cannot claim this credit and the American Opportunity Tax Credit for the same student in the same year.

The Lifetime Learning Credit is worth up to $2,000. You get a credit for 20% of what you spent on up to $10,000 of qualifying education expenses.

There might be other credits you qualify for as well. If you’re filing taxes on your own, your tax software should ask you questions to determine which you qualify for and it’ll guide you through filling out the appropriate forms. If you’re handing your taxes off to a professional, be sure to include proof of how much you spent on your child-related tax credits. And don’t hesitate to reach out if you have questions about which credits you qualify for.

Our picks for 2024’s best credit cards

Our experts carefully review the most popular offers and select those that are worthy of a spot in your wallet. These standout cards come with fantastic benefits like sign-up bonuses worth $200 or more, 0% intro APR for up to 21 months, and cash back rates up to 5%.

Click here to see our top credit cards

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.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Kailey Hagen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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