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Correct Answer: keep track of spending.
**option 1: keep track of spending.** maintaining good credit is essential for financial stability and can be achieved by diligent management of expenses. one effective strategy is to keep a close watch on your spending habits. by monitoring your expenditures closely, you ensure that you do not overspend or exceed your credit limits. following the 20/10 rule, which advises not to spend more than 20% of your annual net income on credit, can help in keeping your credit utilization in check and prevent debt accumulation. additionally, keeping track of spending helps in planning and saving for future financial goals while avoiding impulsive purchases that can lead to high credit utilization.
**option 2: have a minimum of 10 credit cards open at all times.** this approach is generally not recommended for maintaining good credit. having too many credit cards can lead to high levels of debt and potentially unmanageable monthly payments. each new card application can also result in a hard inquiry on your credit report, which might temporarily lower your credit score. instead, it's more prudent to maintain a few credit cards and manage them responsibly by paying balances in full and on time.
**option 3: use 100% of available credit.** utilizing 100% of your available credit is highly discouraged as it indicates to creditors that you may be at risk of financial difficulty. high credit utilization ratios can negatively impact your credit score. financial experts typically recommend keeping your credit utilization below 30% to maintain a good credit rating. maximizing your credit limits can also lead to higher debt and interest payments, making financial management more challenging.
**option 4: close all credit cards at once.** closing all credit card accounts simultaneously can damage your credit score by reducing your overall available credit and increasing your credit utilization ratio. it can also negatively affect the length of your credit history, which is a significant component of your credit score. a better strategy would be to gradually close or keep unused credit cards with no annual fees open to maintain a longer credit history and favorable credit utilization rate.
**option 5: never pay more than the minimum payment.** consistently paying only the minimum on your credit card balances can lead to prolonged debt and significant interest charges. it also might signal to creditors that you are struggling to manage your debt. to maintain a good credit score and reduce interest expenses, it's advisable to pay balances in full each month or, if that's not possible, to pay more than the minimum required. this demonstrates responsible credit management and can help avoid costly debt accumulation.
in conclusion, the best option for maintaining good credit is to keep track of spending. this involves careful budgeting, adhering to the 20/10 rule, and ensuring that expenditures do not exceed what you can afford. monitoring and adjusting your spending habits as necessary can safeguard your credit score and lead to better financial health.
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