What factors can negatively impact a credit score?

The factors identified in the correct answer — late payments, high credit utilization, and defaulting on loans — are all significant contributors to a negative credit score.

Late payments are particularly damaging because payment history is one of the most crucial elements of credit scoring models. A single late payment can stay on a credit report for several years, impacting the score and reflecting poorly on the borrower’s reliability.

High credit utilization means that a person is using a large proportion of their available credit. This can suggest to lenders that the individual may be over-leveraged or dependent on credit, which can be perceived as a risk factor. Generally, maintaining a utilization ratio below 30% is advisable to maintain a healthy credit score.

Defaulting on loans indicates that a borrower has failed to meet the obligations of a loan agreement, which can result in severe impacts on credit scores, including long-term marks on credit reports. Defaulting is viewed as a significant breach of trust between the borrower and the lender, often leading to additional penalties and long-lasting damage to creditworthiness.

In contrast, the other options include factors that either do not significantly impact credit scores or are more nuanced in their effect. Frequent credit inquiries can affect a score slightly, but they are not as detrimental as