What is a recommended method for improving your credit score?

• A. By applying for multiple new loans
• B. By paying bills on time and reducing debt
• C. By defaulting on old debts
• D. By increasing credit utilization

Answer: (B)

Paying bills on time and reducing debt are fundamental strategies for improving your credit score. When you make payments on time, it demonstrates to creditors that you are responsible and reliable, which is a key factor in how credit scores are calculated. Payment history accounts for a significant portion of your credit score, so consistent, timely payments can positively impact this aspect.

Reducing debt is equally important because it lowers your credit utilization ratio, which is the amount of credit you're using compared to your total available credit. A lower ratio is more favorable because it indicates to lenders that you are not overly reliant on credit and manages your debts effectively. This combination of punctual payments and reduced debt contributes to a stronger credit profile and can lead to an increase in your credit score over time.