How can you improve your credit score?

How can you improve your credit score?

• A. By increasing your debt
• B. By paying bills on time and reducing credit card balances
• C. By ignoring your credit report
• D. By taking out new loans frequently

Answer: (B)

Improving your credit score hinges significantly on how you manage your debt and payment habits. Paying bills on time demonstrates reliability as a borrower, which is a critical factor in your credit score. Payment history accounts for a significant portion of most credit scoring models, so timely payments positively influence your score. Reducing credit card balances is equally important. High credit utilization—the ratio of your current credit card balances to your total credit limit—can negatively affect your credit score. Keeping this utilization low, ideally below 30%, shows that you are not overly reliant on credit and can manage debt responsibly. Together, these actions help enhance your creditworthiness, making you a more attractive candidate for future borrowing, which can lead to better interest rates and terms.

Improving your credit score hinges significantly on how you manage your debt and payment habits. Paying bills on time demonstrates reliability as a borrower, which is a critical factor in your credit score. Payment history accounts for a significant portion of most credit scoring models, so timely payments positively influence your score.

Reducing credit card balances is equally important. High credit utilization—the ratio of your current credit card balances to your total credit limit—can negatively affect your credit score. Keeping this utilization low, ideally below 30%, shows that you are not overly reliant on credit and can manage debt responsibly.

Together, these actions help enhance your creditworthiness, making you a more attractive candidate for future borrowing, which can lead to better interest rates and terms.