What practice could negatively affect one's credit score?

Reaching the spending limit on one's credit account can negatively affect a credit score because it significantly increases the credit utilization ratio, which is a key factor in credit scoring models. Credit utilization is the percentage of available credit that is being used. Generally, it is advised to keep this ratio below 30%. When a person reaches their spending limit, it suggests that they may be relying too heavily on credit, which can indicate risk to lenders. This can lower the credit score because it suggests potential financial instability or difficulty managing credit, leading to decreased trustworthiness in the eyes of financial institutions.

On the other hand, paying bills on time is a positive financial habit that builds a good payment history and directly contributes to a higher credit score. Reducing debt levels is also beneficial, as it decreases overall indebtedness and improves credit utilization. Opening additional credit accounts can have mixed impacts; while it can increase overall credit available, it may also lead to hard inquiries that might negatively affect the score in the short term, particularly if not managed responsibly.