What is an effective way to improve your credit score?

Keeping credit card balances low and paying bills on time is an effective way to improve your credit score because it demonstrates responsible credit management. Credit scoring models, such as those created by FICO and VantageScore, heavily weigh payment history and credit utilization in their calculations.

When you pay your bills on time, you show lenders that you can manage debt responsibly, contributing positively to your payment history, which typically accounts for about 35% of your credit score. Furthermore, keeping credit card balances low—ideally below 30% of your credit limit—reflects well on your credit utilization ratio. A lower utilization ratio indicates to creditors that you're not overly reliant on credit, which can make you a more attractive candidate for future loans or credit lines.

The other options, while they may seem to offer some benefits, do not effectively contribute to improving your credit score in the same way. For instance, taking out multiple loans at once can increase your overall debt and lower your credit score due to hard inquiries from lenders. Using only cash means you won’t build any credit history, which is essential for maintaining a good credit score. Lastly, closing old credit accounts can negatively impact your score by reducing your overall credit limit and shortening your credit history, both of which