Credit

6. If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?

Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control

19. As a young adult, all of the following are good strategies for building credit, EXCEPT:

Take out a payday loan

23. Duc has a credit card with a $1000 credit limit. His outstanding balance is currently $800. What is the maximum amount he can now spend on this credit card?

$200

2. The average APR for a payday loan is closest to ...

400%

7. When loans are amortized, monthly payments are _______ , while the amount of your monthly payment applied to interest ________ and the amount of your monthly payment applied to the principal _______ over time.

Constant, Decreases, Increases

8. Which of the following individuals or groups would be the LEAST likely to look at your credit score?

A bank representative who is helping you open a savings account

22. Trudy tells her mom that she wants to buy a house within two years of graduating from college. Her mom says Trudy will need a down payment first. What is a down payment?

A large sum of money you pay when taking out a mortgage so that the principal of your loan is smaller

8. Which of the following is true about fixed and adjustable-rate mortgages?

Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions

1. Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?

All 3 cards are completely different

20. Amy and Chuck each buy a house in the same neighborhood for $250,000. Amy's monthly mortgage payment is $400 more per month than Chuck's. Which one of the following statements could explain this difference?

Amy chose a shorter term for her mortgage, so her monthly payments are higher

4. Which of the following is most likely to represent a fixed rate, secured debt?

An auto loan

15. Which of the following things should you have ready when contacting a credit reporting agency to report an error on your credit report?

An explanation of the mistake and any evidence you have supporting your claim

24. Which free credit report service is authorized by federal law but only accessible once per year?

AnnualCreditReport.com

2. Heather realized she has taken out too much debt and it has started to negatively impact her ability to budget. She has decided to pay off this debt in full as soon as possible. All of the following would be beneficial strategies EXCEPT...

Applying for another credit card to use in case she runs out of cash paying off her debt

16. Which of the following could have a NEGATIVE impact on your credit score if done in a short period of time?

Applying for multiple credit cards

7. Melvin is 19 years old and wants to begin establishing a credit history. Which action should he take to meet that goal?

Ask his parents to cosign a credit card or add him as an authorized user on their credit card

14. You find an error on your credit report: Your credit card account indicates that you are 60 days late on your payment but you have bank records indicating that you have always made on-time payments. What should you do FIRST?

Contact the credit card company to have them fix it

12. Who tracks all of your credit information?

Credit reporting agencies (Equifax, Experian and TransUnion)

20. You're paying your credit card bill and your student loan payment each month, but you're falling behind on your auto loan payment. Which friend's advice could have a NEGATIVE impact on your credit score?

Debbie says, "Stop making the credit card payment for a few months until you're caught up on the auto loan."

5. Which of the following methods of getting your credit score would involve paying a fee?

Getting a score from myFICO.com

11. What strategy should you use to pay off multiple sources of debt if you want to pay the lowest amount of interest over time?

High rate method

17. Which of the following statements is CORRECT about secured loans?

If the borrower does not make payments, the lender can repossess the item

6. Your friend confides in you that he has a low credit score. What is the single best way for him to improve his score?

Make on-time payments

17. Which best describes the Debt Snowball method for paying off debt?

Make the monthly minimum payments on all your debts, and then put any extra cash toward the debt with the lowest balance

16. Select the statement below that accurately describes a characteristic of a credit card.

Making full payments on-time every month is the only way to avoid interest charges

9. Which of these credit payback strategies would lead to the HIGHEST overall cost?

Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

10. Denise took out a payday loan for $300 in August. By February of the next year, she was able to pay back the loan, but she had spent a total of $750 doing so. What's the most likely story of how this happened?

Payday loans must be paid in full within two weeks, and if not, the only option is to renew the loan for a high penalty fee, which she did approximately 12 times

21. Why are payday loans so much easier to qualify for than traditional bank loans?

Payday loans require proof of employment or other regular income but not a credit check

What are the two most important factors in calculating your credit score?

Payment history and total debt

11. Taylor is about to go car shopping, and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model car she's looking for to cost $35,000. If her top priority is having the lowest monthly payments possible, which advice should she follow?

Put in $5000 for your down payment, and choose a loan with a long term length

18. An excellent credit score will help with which aspect of car financing?

Qualifying for a low interest rate

4. All of the following would show up on a credit report EXCEPT...

Salary of your current job

13. What is the general timeline to establish your first credit score?

Six months after you first actively use your credit

14. Credit card disclosure: "Your due date is at least 25 days after the end of the billing cycle. We will not charge you interest on new purchases provided that you have paid your previous balance in full by the due date each month." Identify the true statement.

The 25 days after the end of the billing cycle is referred to as the grace period

23. The amount you can charge to a secured credit card is limited by...

The amount of money you deposit into an account as collateral

25. How can your credit score impact your financial well-being?

Your credit score can determine whether you are approved for a loan and what the interest rate on that loan will be

5. Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?

The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly

25. Why would credit card companies prefer that their cardholders make the minimum monthly payment every month rather than paying their total balance in full?

This enables the credit card company to make more money

10. You have a credit card that you use regularly for small purchases with the goal of improving your credit score. Which strategy would have the GREATEST positive impact?

Use less than 30% of the credit limit and pay it off in full every month by the due date

18. Which of these represents a potential consequence of neglecting to pay your federal student loans?

Wages or tax refunds can be garnished

3. Which of the following statements comparing credit and debit cards is TRUE?

With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later

13. What is an advantage of using a credit card?

You can make an emergency purchase that you otherwise don't have the money to pay for right now

19. What benefits do you receive by taking out a loan with a cosigner?

You have a better chance of getting approved and getting a lower interest rate if the cosigner has good credit

21. Which response best completes the sentence "It's best to begin establishing credit when you're young because ________" ?

You will likely need a credit history to rent your first apartment, finance your first car, or open an unsecured credit card

12. Reading through a credit card's Schumer Box, you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?

Your APR will be within that range, depending on the strength of your credit history

15. A loan with a shorter term length will have __________ monthly payments, and you will pay __________ in total interest. The shorter your term length, the _______ your monthly payments, and the _______ total interest you will pay.

higher, less