Question

of the following statements, which one or ones describe actions harmful to your credit score?

i. owing a lot of money
ii. having many lines of credit
iii. making steady payments
a. i and ii
b. ii only
c. i and iii
d. i only

Explanation:

Analyze Statement I: Owing a lot of money

Using the Credit Score Factors knowledge point

• Owing a large amount of money increases your credit utilization ratio (amounts owed), which accounts for approximately 30% of your FICO® score.
• High utilization is viewed as a higher risk by lenders and negatively impacts (harms) your credit score.
• Therefore, Statement I describes an action harmful to your credit score.

Analyze Statement II: Having many lines of credit

Using the Line of Credit knowledge point

• Simply having multiple lines of credit is not inherently harmful; a diverse mix of credit accounts (credit cards, retail accounts, installment loans) can actually benefit your credit score (representing 10% of the score).
• While applying for many new accounts in a short period can cause temporary drops due to hard inquiries, merely "having" them is not classified as a primary harmful action.
• Therefore, Statement II does not describe an action that is inherently harmful.

Analyze Statement III: Making steady payments

Using the Credit Score Factors knowledge point

• Payment history is the single largest factor in determining your credit score, accounting for 35% of the total score.
• Making steady, on-time payments demonstrates reliability and consistently improves or maintains a high credit score.
• Therefore, Statement III is highly beneficial, not harmful.

Evaluate the options

• Since only Statement I describes an action harmful to your credit score, the correct choice is "I only".
• This corresponds to option d.

Answer:

• a. I and II
• b. II only
• c. I and III
• d. I only (Correct answer)