Maya has a strong payment history and carries no balance on a credit card she opened seven years ago. A friend advises her to close this card since she never uses it and it creates a security risk. What is the most likely consequence of closing it?
AHer score will improve because having fewer open accounts signals financial discipline
BHer score will improve because lenders prefer borrowers with a smaller credit footprint
CHer score may decrease because closing the account shortens her average credit history and reduces total available credit, potentially raising utilization on remaining cards
DHer score will be unaffected because closed accounts remain on your credit report indefinitely
Closing an old card harms two credit factors simultaneously: it reduces average account age (part of the 15% 'length of credit history' factor, since the account eventually drops off your report) and reduces total available credit, which can raise utilization on remaining cards. Old, unused cards in good standing are credit assets, not liabilities — the 'simpler is safer' instinct is incorrect here. Option D is partially true (closed accounts stay on your report for 7-10 years) but eventually they do drop off, so the damage accumulates over time.
Question 2 Multiple Choice
A friend claims he improved his credit score by 40 points in a single month. Which action is MOST likely responsible for a change this large this quickly?
AHe paid all his bills on time for three consecutive months, building payment history
BHe opened two new credit card accounts to increase his available credit and credit mix
CHe paid down his credit card balances from 85% utilization to 12%
DHe requested his free annual credit report and reviewed it carefully for errors
Credit utilization (30% of the score) resets every billing cycle as new balances are reported. Dropping from 85% to 12% — from a high-risk signal to well below the ideal 30% threshold — is the fastest single lever for a large, rapid score improvement. Payment history improvements build over months of consistent behavior. Opening new accounts temporarily lowers the score through hard inquiries and reduced average account age. Reviewing your own credit report is a soft inquiry with zero score impact.
Question 3 True / False
Checking your own credit score regularly damages your credit because it generates hard inquiries on your report.
TTrue
FFalse
Answer: False
When you check your own credit, it generates a soft inquiry, which has zero impact on your score. Hard inquiries — which do temporarily lower your score by a few points — occur only when a lender formally reviews your credit as part of a credit application. This is among the most persistent credit misconceptions, and it leads people to avoid monitoring their own credit file. Regular self-monitoring is actually valuable: it helps you detect errors and fraudulent accounts early, both of which can be disputed and removed, potentially improving your score.
Question 4 True / False
Keeping a credit card open with a zero balance generally benefits your credit score more than closing it.
TTrue
FFalse
Answer: True
An open card with zero balance contributes positively to two factors: it maintains available credit (keeping your overall utilization ratio low) and it continues aging (contributing to length of credit history). Closing it eventually removes its age from your history average once it drops off your report. The only exception worth considering is if the card carries an annual fee that isn't worth paying — in that case, weigh the fee against the credit benefit. Otherwise, keeping old accounts open is almost always the better choice.
Question 5 Short Answer
Why does credit utilization matter to lenders, and why is it the fastest credit factor to change?
Think about your answer, then reveal below.
Model answer: Utilization signals whether you are financially strained relative to your available credit. High utilization suggests reliance on debt, increasing default risk. It is the fastest factor to change because it resets each billing cycle — pay down a balance and the lower ratio is reported next month.
Unlike payment history, which requires months of consistent on-time behavior to improve, or account age, which is fixed by time, utilization is directly and quickly actionable. If you have an important loan application coming up, paying down card balances in the prior month can meaningfully improve your score in time for the decision. Lenders care about utilization because it distinguishes between someone who has access to credit and someone who is maxing it out — only the latter signals potential distress.