personal finance chapter 9

Which of the following is not one of the national credit reporting agencies?

National Credit Union Administration

The Equal Credit Opportunity Act prohibits discrimination in the granting of credit on the basis of all except

ability to repay

When comparing credit terms, it is important to consider

all of the above

The annual cost of credit a lender charges.

annual percentage rate (APR)

A legal state in which the courts excuse a debtor from repaying some or all debt. In return, the debtor must give up certain assets and possessions.

bankruptcy

Credit cards that allow consumers to use credit at many places can be obtained through

banks, credit unions, and credit card issuers

A consumer should check out his or her credit rating periodically to

be sure the information on file is correct

Property that a borrower promises to give up in case of default.

collateral

A person who signs a loan along with a borrower and agrees to repay the loan if the borrower fails to repay it.

cosigner

An arrangement that allows consumers to buy goods or services and pay for them later.

credit

Allows consumers to make purchases or borrow money on a time-payment plan.

credit card

A record of a person's credit history and financial behavior.

credit report

When a borrower fails to pay the debt owed.

default

Which of the following is not an advantage of using credit?

ease of spending money you do not have

Credit cards are used primarily to obtain cash loans.

false

Credit is only available to those with high incomes and valuable property.

false

Credit reporting agencies automatically send credit reports to consumers each month.

false

Filing bankruptcy is the easiest and most practical solution for people who have credit problems.

false

Finance charges remain the same regardless of the amount of credit used or the length of time you take to repay.

false

For the most part, it is a good idea to use credit any time you want something and do not have enough cash to pay for it.

false

Most consumers have no need to use consumer credit

false

Open-end credit is used for loans.

false

Regardless of where you shop for credit, the cost of a given amount of credit will be the same.

false

There is one central reporting agency that keeps a running record of the financial and credit transactions of credit users.

false

The forced sale of a property.

foreclosure

A legal procedure requiring a portion of a debtor's pay to be set aside by the person's employer to pay creditors.

garnishment

The time between the billing date and the start of interest charges.

grace period

You can damage a good credit rating by

ignoring bills you cannot pay until the creditors take collection action

As the percentage rate of interest on a credit transaction increases, the finance charges

increase

Which of the following is a type of closed-end credit?

installment loan

A legal claim on a borrower's property by a creditor who is owed money.

lien

Consumer credit counseling services sponsored by the National Foundation for Consumer Credit

offers reliable low cost help and advice to debt troubled consumers

Allows the borrower to use a certain amount of money for an indefinite period of time.

open-ended credit

A business that gives customers high-interest loans with personal property, such as jewelry, held as collateral.

pawnshop

A short-term, high interest loan that must usually be repaid on the borrower's next payday.

payday loan

Credit is available most readily to

people with a good credit rating

The amount borrowed on a loan.

principal

The amount you pay to use credit depends on all of the following except

reasons for using credit

When a lender takes back collateral if a borrower fails to repay a loan.

repossession

A loan that requires collateral

secured loan

A loan made using the borrower's car as collateral.

title loan

A chief advantage of using credit is the opportunity to use goods and services while paying for them.

true

A sound credit rating is an important financial asset.

true

According to the Equal Credit Opportunity Act, a person who is denied credit has the right to a written explanation of why credit was denied.

true

Consumer credit provides the extra buying power needed to support mass production and distribution of goods and services.

true

Credit is more costly than using cash.

true

Possessing credit cards tempts many people to spend more than they can afford.

true

The Electronic Funds Transfer Act puts a $50 limit on cardholder liability for unauthorized transfers

true

The Truth in Lending Law requires creditors to tell consumers what credit will cost them before they use it.

true

Using credit can simplify telephone, mail, and Internet shopping and make necessary returns and exchanges easier

true

You should never sign a credit contract without knowing the exact meaning of all the terms it contains.

true

If your credit card is lost or stolen,

you are responsible for only $50 in charges per card