how to build good credit
- pay all bills on time (credit cards, loans, phone bill).
- keep credit card balances low (below 30% of the limit).
- dont apply for too many new accounts at once.
- keep old accounts open (long history helps).
- use credit responsibly – borrow only what you can repay.

questions
part a: understanding the basics
1. what is considered a good credit score range?
2. which factor has the biggest impact on your credit score?
3. why is keeping your credit card balance below 30% of the limit important?

part b: scenarios
read each situation and decide if it helps or hurts your credit score:
4. sarah pays her credit card bill 3 days late.
5. marcus keeps his balance at $150 on a $1,000 limit card.

Question

how to build good credit
- pay all bills on time (credit cards, loans, phone bill).
- keep credit card balances low (below 30% of the limit).
- dont apply for too many new accounts at once.
- keep old accounts open (long history helps).
- use credit responsibly – borrow only what you can repay.

questions
part a: understanding the basics
1. what is considered a good credit score range?
2. which factor has the biggest impact on your credit score?
3. why is keeping your credit card balance below 30% of the limit important?

part b: scenarios
read each situation and decide if it helps or hurts your credit score:
4. sarah pays her credit card bill 3 days late.
5. marcus keeps his balance at $150 on a $1,000 limit card.

Accepted Answer

### Part A: Understanding the Basics
1. **Brief Explanations**: A good credit score range is typically considered to be 670 - 739 for a "good" score (on the FICO scale, 300 - 850), with 740 - 799 being "very good" and 800+ being "excellent". Different scoring models and credit bureaus may have slight variations, but this is a common standard.
    **Answer**: A good credit score range (e.g., FICO) is typically 670 - 739 (with 740 - 799 as very good and 800+ as excellent).

2. **Brief Explanations**: Payment history (whether you pay bills on time) has the biggest impact on your credit score. It generally accounts for about 35% of a FICO score. Late payments, defaults, etc., can severely damage your score, while consistent on - time payments help build a positive credit history.
    **Answer**: Payment history (paying bills on time) has the biggest impact on your credit score.

3. **Brief Explanations**: Keeping your credit card balance below 30% of the limit is important because credit utilization (the ratio of your credit card balance to your credit limit) is a significant factor in your credit score (about 30% of a FICO score). High utilization (above 30%) can be seen as a sign of financial stress or over - reliance on credit, which can lower your credit score. Lenders view lower utilization as a sign of responsible credit management.
    **Answer**: It's important because credit utilization (balance/limit ratio) impacts your credit score (about 30% of FICO score); high utilization can lower your score, while low utilization shows responsible credit use.

### Part B: Scenarios
4. **Brief Explanations**: Paying a credit card bill 3 days late can hurt your credit score. Payment history is a major factor in credit scoring, and even a short - term late payment (depending on the creditor's reporting policy) can be reported to credit bureaus and negatively impact your score. Some creditors may have a grace period, but in general, late payments are not favorable for credit scores.
    **Answer**: Hurts (because late payments negatively impact payment history, a key credit score factor).

5. **Brief Explanations**: Marcus's credit utilization ratio is $\frac{150}{1000}=0.15$ or 15%, which is below 30%. Since keeping credit utilization low (below 30%) is good for your credit score (as it shows responsible credit use and positively impacts the credit utilization factor of your score), this situation helps his credit score.
    **Answer**: Helps (his credit utilization ratio is 15% (below 30%), which is good for the credit score).

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Part A: Understanding the Basics

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