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Please read the following case study carefully and answer the questions accordi...

May 19, 2024

Solution

Cindy has been using her credit card for the last four years and has always made her payments on time. Sometimes she pays the full amount, but she always pays at least the minimum. : Positive Impact : Justification: Consistently making payments on time, even if it's just the minimum, helps build a good credit history and improves her credit score

Cindy applies for a new credit card with a higher limit. : No Impact : Justification: Applying for a new credit card can have a neutral impact initially. It may slightly lower her credit score due to a hard inquiry, but it can also increase her available credit, which might improve her credit utilization ratio

Cindy is excited about her new apartment and buys all new furniture, pushing her credit card over its limit. : Negative Impact : Justification: Exceeding her credit limit can significantly harm her credit score as it indicates poor credit management and increases her credit utilization ratio

She meets lots of new friends and buys new outfits to wear on the weekends. She maximizes her newly acquired credit card. : Negative Impact : Justification: Maxing out her credit card increases her credit utilization ratio, which negatively affects her credit score

Cindy struggles to pay for her credit cards, along with meeting her rent. She is late on her new credit card payments. : Negative Impact : Justification: Late payments are one of the most significant factors that can lower a credit score, indicating financial instability

Cindy's car breaks down, and she decides to buy a new one. The car dealer turns down her request for a loan due to poor credit. : Negative Impact : Justification: Being denied a loan due to poor credit indicates that her credit score has already been negatively impacted by her previous actions

Cindy seeks help from a reputable local non-profit credit counseling agency. : Positive Impact : Justification: Seeking help from a credit counseling agency can positively impact her credit as it shows she is taking steps to manage her debt responsibly

Cindy sticks to her spending plan and meets all her minimum payments. Sometimes she can pay more than the minimum amount. : Positive Impact : Justification: Sticking to a spending plan and making consistent payments, even if it's just the minimum, helps improve her credit score over time

Cindy cancels her newly acquired credit card and learns to use the first credit card only when she needs it. : No Impact : Justification: Canceling a credit card can have a neutral impact. It might slightly lower her credit score due to reduced available credit, but it can also help her manage her finances better

Cindy continues using the first credit card and tries to pay off her card completely if possible. : Positive Impact : Justification: Continuing to use her credit card responsibly and paying off the balance completely can significantly improve her credit score

Answer

Cindy's credit score is influenced by her payment history, credit utilization, and responsible credit management. Positive actions like making timely payments and seeking credit counseling improve her score, while negative actions like exceeding credit limits and late payments harm it.

Key Concept

Credit Score Impact

Explanation

Cindy's various actions affect her credit score differently. Timely payments and responsible credit management improve her score, while exceeding credit limits and late payments harm it.