chapter 7 personal finance
identity thieves that have systematically infiltrated corporations and financial institutions in order to facilitate large-scale identity thefts are usually a part of
a well-organized crime ring
generally, the ____ the credit history, the _____ the credit limit
better, higher
all of the following situations are valid reasons to borrow funds except
borrowing for everyday living expenses
of the following situation, which is not an advantage of using credit
buying today and paying tomorrow seems ideal, but continual spending can lead to financial problems
which of the following can be used by a creditor in deciding whether or not to grant credit
credit history
a commitment by insurance company to cover credit repayments under advance conditions such as accident or illness is called
credit insurance
which of the following statements is true regarding non-installments credit
credit is usually issued for 30 days or less
the ____ is a document showing information reporting your payment history and past use of credit
credit payment history
the _____ is the most important factor used in the FICO credit scoring model
credit payment history
the item that receives the most weight in the FICO credit scoring system is
credit payment history
which of the following may result in much of your personal financial information becoming part of the public record
divorce
which of the following items should not be removed from your wallet
drivers license
going through documents discarded by your bank to obtain information i order to access your bank account is an example of
dumpster diving
the federal law that prohibits the denying based on gender, age, race, national origin, religion, or martial status is the _____-
equal credit opportunity act
the law that prohibits denying credit due to gender, age, race, national origin, religion, or marital status is
equal credit opportunity act
____,_____,____ are the three major credit bureaus
equifax, experian, transunion
the use of credit may result in _____ spending and ____ debt
excessive, increased
which of the following is not ONE of the three primary credit bureaus
fair isaac corporation
credit issued by department stores for relatively long periods of time is called non-installment credit
false
funds provided by a borrower that will be repaid in the future, with interest, is credit
false
identity theft only occurs through individuals who do not have legitimate access to your information
false
if you refrain from using any credit, it will assure you the lowest possible interest rate when you decide to use it
false
it is easier to pay back what you borrow than to obtain credit in the first place
false
obtaining money, goods, and services are the only reasons for identity theft
false
revolving open-end credit typically does not specify a maximum amount that can be borrowed
false
the credit CARD act of 2009 made it easier for college students to obtain credit cards
false
the equal credit opportunity act allows a creditor to deny credit based on a persons age
false
the longer you maintain relationships with creditors, the lower will be your credit score
false
transunion is not one of the three primary credit bureaus
false
unless your identity is stolen by someone out of state, you should only report the crime to local law enforcement
false
using a shredder to destroy personal data will protect you from shoulder surfing
false
with a credit score of over 500, you should have no problem getting approval for credit purchases
false
you should be very selective in shredding documents and when in doubt, do not shred them
false
creditors prefer a ____ amount of capital and ____ collateral in the best of circumstances
high, high
creditors prefer a ______ level of cash inflows and ____ level of cash outflows
high, low
credit scores in the 500-600 range will likely result in
higher interest rates
which of the following is NOT true regarding revolving open-end credit
if the balance is not paid off over a period of months, a penalty is incurred
which of the following is the best rule to follow in shredding information
if you have any question, shred it
the ability to save funds is ____ when credit payments are _____
increased, small reduced, large
advantages of using credit are all of the following except
increases the number of check written
______ is a borrowing arrangement in which regular monthly payments of principal and interest must be made
installments credit
of the following statements, which is not a disadvantage of using credit
it is more difficult to obtain than repay
which of the following statements is NOT true regarding reviewing your credit report
it will help you determine if there are credit cards that you should apply for to improve your credit standing
why is it so important that you make all of your credit and loan payments on time
late payment history lasts 7 years on your credit file
improper use of credit may
make it necessary to file for bankruptcy
which of the following is not a disadvantage of using credit
makes it easier to save
which of the following will not help you establish a good credit history
making as many purchases as possible with cash
which of the following is NOT a factor in the FICO credit scoring
martial status
____ is short-term credit provided by some department stores to consumers to purchase specific items
non-installment
credit extended to consumers for short periods of time to make specific purchases is
non-installment credit
you are ready to make a new car purchase and the manufacturer is offering a 60 month, zero percent interest loan, or, a $1500 cash rebate. the price of the car is $25,000. which option should you choose
not enough info
if you receive a phone call that seeks to verify or update personal information you should
obtain the persons name and phone number and call the company to verify his or her credentials
you should review your credit report from each credit bureau at least
once a year
manipulating e-mail viruses and host files to redirect users from legitimate commercial web sites to bogus web sites to obtain log-in names and passwords is referred to as
pharming
using e-mail messages that pretend to be from a legitimate source to obtain account information for the purpose of identity theft is referred to as
phishing
posing as an employee of a brokerage firm to obtain information to allegedly update your account information is an example of
pretexting
____ is a credit arrangement where the balance may be paid off monthly and interest is only charged on the remaining unpaid amount
revolving open end credit
which of the following is the least common manner in which an identity theft victim discovers the crime
routine examination of a credit report
if you plan on using your credit card to carry a balance for more than a month or two, you should
should around to find the lowest interest rate card on the market before you make the purchases
if a person obtains your credit card number by standing close enough to you to either see your credit card or hear you speak the number during a telephone call, they are
shoulder surfing
identity thieves that obtain your information from the magnetic strip on your credit card are using a technique known as
skimming
the widespread adoption of EMV technology is likely to reduce
skimming
which of the following is a disadvantage of using credit
slowing of progress towards financial goals
all of the following are correct statements about credit EXCEPT
the interest is the total amount to be repaid
an advantage to credit is it eliminates the need for writing checks
true
credit cards are an example of revolving open-end credit
true
excessive use of credit can impair your ability to save money
true
federal law requires creditors to explain the reasons for the denial of credit
true
historical credit problems normally remain on a credit bureaus report for seven years and ten years for bankruptcy
true
if you are a victim of identity theft, you may be turned down for employment as a result of incorrect background information
true
if you find that you will not be able to make credit payments on time, the best course of action is to immediately inform the creditor
true
in order to have good credit in the future, you must have used it wisely in the past
true
most identity theft victims discover the crime in a reactive as opposed to a proactive manner
true
posing as an employee of a financial institution to obtain information for purposes of identity theft is an example of pretexting
true
the fair credit reporting act requires bureaus to correct any erroneous information on your credit report
true
the fair reporting act limits the sharing of credit information
true
the most important element in FICO credit scoring is your payment history
true
the personal cost of identity theft is difficult to measure, but calculating the financial cost is an easier task
true
the proper use and control of credit is the best way to build a good credit history
true
using more credit than can be repaid is a primary cause of individual bankruptcy
true
when creating credit scores, credit bureaus rely on a model career by the fair isaac corporation
true
you can begin to build a credit history by using utility services
true
your credit report can be requested online and should be checked periodically for errors
true
a _____ extends credit by providing a service and billing for the service at the end of the time period
utility company
the minimum credit scare required by financial institutions
varies by institution
building a strong credit file when you are in college and beginning your career is
wise so that you will have to pay interest on the deferred amounts
free credit reports are accessible to all US consumers at
www.annualcreditreport.come
which of the following will not be included on your credit report
FICO score
according to the federal trade commission, the average individual loss as a result of identity theft is about
$1,500
the average credit card balance of undergraduate students including those with a zero balance is between
$200-$700
what steps can you take to improve your credit score
1. catch up on late payments 2. reduce unnecessary expenditures 3. destroy credit cards to reduce temptation 4. notify creditors of late payment and work out arrangements to pay
3 disadvantages of using credit
1. high cost of using credit 2. difficulty in repayment 3. impulse purchases that you cannot afford
factors that are used in determining credit scoring in the FICO model
1. paying your bills on time over the last 7 years 2. the amount of credit used each month 3. length of relationship with creditors 4. number of recent credit inquiries
paying your phone bill and electric bill each month will help you to establish a
credit history
historical credit problems remain on a credit bureaus report for _____ years while a bankruptcy remains for _____ years
7, 10
a credit score of _____ would normally allow you to have easy approval for credit
700
very high credit scores are considered anything over
700
which of the following is not a step you should take to try to improve your credit score
applying for more credit cards
identity theft occurs when an individual obtains, without your permission, any of the following information EXCEPT
date and place of birth
the impact of credit ______ saving and ______ spending
decreases, increases