What action helps build and maintain a good credit rating?

What action helps build and maintain a good credit rating?

• A. Close Unused Credit Cards.
• B. Apply for and Open New Credit Accounts Only as Needed.
• C. Pay Your Bills on Time.
• D. Use Maximum Credit Card Balances.

Answer: (C)

Paying bills on time is the most powerful habit for building and keeping a good credit rating. When you consistently pay each bill by its due date, lenders see you as trustworthy and likely to repay what you borrow, which helps your credit score rise or stay high. Payment history is the largest factor in most credit scores, and late or missed payments can linger on your record and drag your score down, especially if your overall credit history is short. Other practices can undermine your score even if you’re paying on time. Closing unused cards reduces your total available credit and can raise your credit utilization or shorten the age of your accounts, both of which can lower your score. Opening new accounts frequently adds inquiries and can shorten average account age, which can also hurt. Carrying high balances on cards signals risk and lowers your utilization ratio in a negative way, harming your score. So the best action to build and maintain good credit is to pay every bill on time.

Paying bills on time is the most powerful habit for building and keeping a good credit rating. When you consistently pay each bill by its due date, lenders see you as trustworthy and likely to repay what you borrow, which helps your credit score rise or stay high. Payment history is the largest factor in most credit scores, and late or missed payments can linger on your record and drag your score down, especially if your overall credit history is short.

Other practices can undermine your score even if you’re paying on time. Closing unused cards reduces your total available credit and can raise your credit utilization or shorten the age of your accounts, both of which can lower your score. Opening new accounts frequently adds inquiries and can shorten average account age, which can also hurt. Carrying high balances on cards signals risk and lowers your utilization ratio in a negative way, harming your score.

So the best action to build and maintain good credit is to pay every bill on time.