What is a significant action that can negatively impact a credit score?

Maxing out credit cards has a significant negative impact on a credit score because it significantly increases the credit utilization ratio, which is an important factor in credit scoring models. Credit utilization is calculated by dividing the total amount of credit used by the total amount of credit available. When individuals use close to or all of their available credit, it can signal to lenders that they may be over-relying on credit, which can be seen as a risk. Keeping credit utilization below 30% is generally recommended to maintain a healthy credit score. High levels of debt relative to available credit can also lead to higher interest rates on loans and make it more challenging to obtain new credit.

In contrast, consistently making payments on time builds positive credit history and shows reliability, maintaining multiple credit lines can help diversify credit history and potentially improve scores if managed well, and using credit only for emergencies demonstrates responsible credit behavior. Thus, maxing out credit cards stands out as a pivotal action that can severely damage a credit score.