Question

On the path of building my credit, I feel like I am doing okay and I haven't really started building my credit, but from our lesson this week, I feel like I could build my credit pretty well. Some things that may be positively impacting my credit score is paying certain bills before the due date, such as my phone and insurance bill before its due date, paying back any loans that are necessary for banking. On the other hand, not paying back loans, paying bills late, closing and applying to too many credit cards can hurt your credit scores. Going forward, when building my credit, I shall keep paying bills and loans right away and not fall behind on that, budget so I do not have issues with maxing out on my credit card, and only applying to one credit card and closing the account when necessary.

a) Identify positive actions for building credit.
b) List negative actions that can harm credit scores.
c) Explain the importance of budgeting in credit building.
d) Provide recommendations for responsible credit card use.

Answer 1

Positive actions for building credit include paying bills on time and using credit responsibly. Negative actions that can harm credit scores include paying bills late and maxing out credit cards. Budgeting is important in credit building as it helps manage income and expenses.

Step-by-step explanation:

a) Positive actions for building credit:

• Paying bills on time
• Using credit responsibly
• Keeping credit utilization low
• Establishing a good payment history
• Having a diverse mix of credit accounts

b) Negative actions that can harm credit scores:

• Paying bills late
• Defaulting on loans
• Closing credit accounts
• Applying for multiple credit cards
• Maxing out credit cards

c) The importance of budgeting in credit building:

Budgeting helps to manage income and expenses, ensuring that bills and loans are paid on time. It helps to avoid overspending and accumulating debt, which can negatively impact credit scores.

d) Recommendations for responsible credit card use:

• Pay bills in full and on time
• Keep credit card balances low
• Avoid maxing out credit cards
• Limit the number of credit cards
• Regularly check credit reports for accuracy