BUS 160 Credit

Which of the following can be included in your credit report? a. marital status b. race c. gender d. religion

a. marital status

To establish creditworthiness and to have a good credit score, one should probably first: a. open savings and checking accounts. b. ​use credit extensively. c. ​arrange for a small loan. d. ​pay cash for all purchases. e. ​arrange for a large loan from close relatives.

a. open savings and checking accounts.

Another name for open-end credit it a. revolving credit b. installment credit c. convenience credit d. single lump-sum credit

a. revolving credit

When canceling a credit card, you should cut up the card and _____ that you are canceling your account. a. ​inform the issuer in writing ​b. call the issuer and tell them c. ​inform the credit bureau in writing d. ​call the credit bureau and tell them e. ​inform the future lender in writing

a. ​inform the issuer in writing

Payment Reporting Build Credit (PRBC)

check on payment patterns and report to a creditor the history of payments that are typically not included on traditional credit report

Another name for closed-end credit is a. a line of credit b. convenience credit c. revolving credit d. installment credit

d. installment credit

Finance Charge

total dollar amount you pay to use credit

Consumer Credit

use of credit for personal needs (except home mortgage)

Collateral

valuable asset that is pledged to ensure loan payments

As a percent of take-home pay, monthly consumer credit payments should not exceed _____. a. ​25% ​b. 20% c. ​15% ​d. 10% e. ​5%

​b. 20%

If identity is stolen, do these three steps:

1. contact the credit bureaus 2. contact the creditors 3. file a police report

A reasonably good debt-equity ratio for an individual excluding a home mortgage would be a. .35-.40 b. .50-.75 c. .75-.90 d. over 1.0

a. .35-.40

Which federal law limits a cardholder's liability for unauthorized use of a card to $50? a. Truth in Lending Act b. Fair Credit Billing Act c. Equal Credit Opportunity Act d. Fair Debt Collection Practices Act

a. Truth in Lending Act

In evaluating your credit application, a lender may a. ask your age b. ask whether you receive public assistance (food stamps, WIC, welfare) c. ask if you are married or divorced d. ask your specific race or nationality

a. ask your age

Debt-to-Equity ratios are a. calculated by dividing total liabilities by net worth b. calculated by dividing monthly debt payments by net monthly income c. determined by dividing your assets by your liabilities d. calculated by dividing current assets by current liabilities

a. calculated by dividing total liabilities by net worth

What is the first ting you should do if your identity is stolen? a. contact the 3 major credit bureaus b. shred all old documents c. stop shopping online d. keep your existing credit card accounts open, but open new, accounts too in order to separate transactions

a. contact the 3 major credit bureaus

A(n) _____ is an agency that provides credit information about individual borrowers to lenders. a. credit bureau b. ​consumer bureau c. ​insurance company d. ​bank ​e. credit scoring house

a. credit bureau

When did installment credit explode on the american scene? a. during the early 1900's when automobiles were first mass-produced b. in the 1940's when consumer advertising of goods/services created mass awareness of new products c. during the recession of the 1950's when consumers were afraid to spend d. during the inflation of the 1970's when prices were outpacing incomes

a. during the early 1900's when automobiles were first mass-produced

A term that refers to the borrower's assets or net worth is called a. collateral b. capital c. character d. conditions

b. capital

With a bank credit card, one can often avoid interest charges if: a. ​the account balance is paid in full every month. b. ​at least half the account balance is paid every month. ​c. the minimum payment is made every month. ​d. the account is a revolving credit account. e. ​the account balance is below the credit limit.

a. ​the account balance is paid in full every month.

Page 141-143 include bankruptcy 7 and 13

as well as the bankruptcy abuse prevention and consumer protection act of 2005

A valuable asset pledged to assure loan payments and that is subject to seizure upon debt default is called a. capital b. collateral c. conditions d. capacity

b. collateral

Experts suggest that you spend no more than _____% of your net income on non-housing related credit purchases a. 10 b. 20 c. 30 d. 40

b. 20

The Baby Boom generation currently represents about 30% of the population, but holds nearly _____% of the debt outstanding. a. 80 b. 60 c. 40 d. 20

b. 60

Most of the information in your credit file may be reported for _____ years. a. 5 b. 7 c. 11 d. 13

b. 7

Which federal laws protects you by requiring credit bureaus furnish accurate and complete information to lenders? a. Fair Credit Billing Act b. Fair Credit Reporting Act c. Equal Credit Opportunity Act d. Truth in Lending Act

b. Fair Credit Reporting Act

The borrower's financial ability to meet credit obligations is called a. conditions b. capacity c. collateral d. capital

b. capacity

Which of the following is a disadvantage of using credit a. includes advance notice of sales b. increases propensity to overspend c. allows purchase of goods when funds/income is low d. streamlines merchandise returns

b. increases propensity to overspend

Which of the following is true about credit scoring systems? a. Lower scores are better than higher scores. b. ​Scoring systems are based on statistical studies. ​c. Credit unions calculate and sell credit scores to lenders. ​d. Females receive higher scores than males. e. ​Stronger the personal traits of a person, lower will be his credit score.

b. ​Scoring systems are based on statistical studies.

Variable Interest Rate

based on fluctuating rates in the banking system such as the prime rate

Capital

borrower's assets or net worth

Character

borrower's attitude toward his or her credit obligations

Capacity

borrower's financial ability to meet credit obligations

Credit

buy now, pay later

Conditions

general economic conditions that can affect a borrower's ability to repay a loan

Dave's net pay per month is $2,000. What is the maximum dollar amount of debt payments he should have? a. $200 b. $325 c. $400 d. $650

c. $400

If you have declared personal bankruptcy that fact may be reported to credit bureaus for _____ years a. 5 b. 7 c. 10 d. 13

c. 10

In determining your credit capacity, you must first provide for basic necessities, such as a. furniture b. entertainment c. a mortgage/rent d. an automobile

c. a mortgage/rent

Which of the following is most likely NOT a valid reason for using credit? a. borrowing to pay off a hospital bill related to an emergency surgery b. borrowing to buy a car so you can commute to work c. borrowing to support monthly entertainment activities d. borrowing to buy a new computer for your home office so you can work at home more/travel less

c. borrowing to support monthly entertainment activities

A loan officer is examining your income and the amount of your existing debt payments in deciding whether or not to make a loan to you today. Which of the credit C's is the officer assessing? a. capital b. conditions c. capacity d. character

c. capacity

Kathy purchased a $1,000 digital TV from Young's Appliances. She will make 12 equal payments over the next year to pay for it. She is using a. open-ended credit b. revolving credit c. closed-end credit d. a ling of credit

c. closed-end credit

The debt payments-to-income ratio is a. total liabilities/net worth b. assets/liabilities c. monthly credit payments/net pay d. monthly installment payments/gross pay

c. monthly credit payments/net pay

Greg Thompson uses his Visa card to purchase a new digital camera and lens. What type of credit did Greg use? a. installment sales credit b. single lump sum credit c. revolving credit d. installment cash credit

c. revolving credit

Which federal consumer credit law provides specific cost disclosure requirements for the annual percentage rate (APR) and the finance charge as a dollar amount? a. Fair Debt Collection Practices Act b. Fair Credit Billing Act c. Fair Credit Reporting Act d. Truth in Lending Act

d. Truth in Lending Act

If you are denied credit, your first step should be to a. increase your income and decrease spending b. re-apply at another institution c. hire an attorney to defend against discrimination d. check your credit bureau file

d. check your credit bureau file

Which of the following agencies can produce for a subscribing creditor, almost instantaneously, a report about your past and present financial activity? a. the Federal Reserve Bank b. the Consumer Protection Agency c. the Federal Trade Commission d. the Credit Bureau

d. the Credit Bureau

Which of the following is NOT included as part of the calculation of your FICO score a. the number of credit accounts you have b. the variety of credit accounts c. the payment history of the credit accounts d. whether the accounts are single or jointly held

d. whether the accounts are single or jointly held

When/If you co-sign loan a. the creditor cannot garnish your wages b. it is not your legal responsibility to pay the debt c. the creditor must first try to collect from the borrower d. you will have to pay the debt if the borrower does not

d. you will have to pay the debt if the borrower does not

If the information on your credit report is in dispute, you are entitled to: a. ​correct it. b. ​sue. c. ​erase it. d. ​provide your own explanation about the dispute. ​e. withdraw from the credit bureau.

d. ​provide your own explanation about the dispute.

Line of Credit

dollar amount which may or may not be borrowed that a lender makes available to a borrower

Which of the following is an appropriate reason for using a credit card? a. ​Purchase of food b. ​Payment of utility bills c. ​Payment of small cash outlays d. ​Impulse purchases e. ​Shopping convenience

e. ​Shopping convenience

Simple Interest

interest computed on principal only and without compounding

Single Lump-Sum Credit

loan that must be repaid in total on a specific day usually within 30-90 days

Open-End Credit

loans are made on a continuous basis and the borrower is billed periodically for at least partial payment

Credit Rating

measure of a person's ability and willingness to make credit payments on time

Closed-End Credit

one-time loans that the borrower pays back in a specific period of time and in payments of equal amounts

Annual Percentage Rate (APR)

percentage cost of credit on a yearly basis yields a true rate of interest for comparisons with other sources of credit

Interest

periodic charge for the use of credit

Fair Debt Collection Practices Act (FDCPA)

prohibits certain practices by debt collectors

Fair Credit Billing Act (FCBA)

sets procedures for promptly correcting billing mistakes, refusing to make credit card payments on defective goods, and promptly crediting payments

Equal Credit Opportunity Act (ECOA)

states that race, nationality, age, sex, marital status, and certain other factors may not be used to discriminate against you in any part of a credit dealing

Which of the following is an improper use of credit? a. ​Buying a home ​b. Buying a short-lived service c. ​Spreading payments within a budget d. ​Purchasing a big-ticket item ​e. Meeting a financial emergency

​b. Buying a short-lived service

What does a lender look at before granting credit? ​a. Political interests of the borrower ​b. Friend circle of the borrower ​c. Age of the borrower ​d. Assessment of your creditworthiness ​e. Lifestyle of the borrower

​b. Friend circle of the borrower

Which of the following will lead to poor credit rating? a. Opening checking and savings accounts ​b. Opening and using a charge account ​c. Applying for a long-term loan and occasionally being late with a payment ​d. Making payments ahead of scheduled time ​e. Discussing with the lender if you foresee difficulty in making a payment

​c. Applying for a long-term loan and occasionally being late with a payment

Interest will usually begin to accrue immediately when you use a bank credit card to: a. ​make purchases. ​b. send payments. ​c. compute finance charges. ​d. get cash advances. e. meet a financial emergency.

​d. get cash advances.

Chapter 7 bankruptcy will: a. ​restore all the losses incurred by the borrower. b. ​result in the loss of all of one's assets. ​c. require the debtor to pay back the debt in the future. d. ​sell only the home of the borrower. ​e. eliminate most of the financial obligations of the borrower.

​e. eliminate most of the financial obligations of the borrower.