Chapter 6

Which of the following cards is issued as a form of credit by department stores and oil companies?

A retail charge card

Which of the following will lead to a poor credit rating?

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

_____ is a reason that people use credit.

Being able to meet a financial emergency

Which of the following is an improper use of credit?

Buying a short-lived good

It is necessary to give your Social Security number for identification when using a credit card.

False

Overspending will help you manage your budget effectively.

False

Arranging for and fully repaying a small loan helps improve creditworthiness.

True

A(n) _____ is a type of reporting agency that collects and sells credit information about individual borrowers.

credit bureau

Credit scoring systems are often used by lenders to determine applicants' creditworthiness.

true

Credit should not be consistently used for purchasing nondurable goods

true

If you initiated the telephone call, it is okay to give your credit card account number when ordering or purchasing from major catalog houses, airlines, hotels, and so on.

true

Paying a loan on schedule is one way to build a good credit history.

true

You should not give your credit card account number over the phone to people or organizations who call you.

true

You should review your credit bureau file every year.

true

All credit cards have annual fees.

False

Which of the following is not requested in a typical credit card application?

Political affiliations

A credit card application requests information that is routinely used to predict creditworthiness.

True

If a borrower has a high FICO score, then there is:

a high chance of his or her loan getting approved.

Your credit bureau file often includes information about your political and religious affiliations.

false

A payment made using a(n) _____ is equivalent to paying by cash.

debit card

Credit should be used to meet basic living expenses.

false

The decision about whether or not to grant you credit will be made by:

individual creditors.

When canceling a credit card, you should cut up the card and _____ that you are canceling your account

inform the issuer in writing

To establish credit, you should first:

open savings and checking accounts.

Any credit card purchase will effectively be an interest-free loan if you have a zero balance when the grace period begins and you:

pay off the entire balance on or before the due date.

If the information in an individual borrower's credit report contains an error, he or she is entitled to:

request a correction

Credit offered in the form of _____ is most common in department and clothing stores and other high-volume outlets, where customers are likely to make several purchases each month.

retail charge card

A frequent flyer card can be aptly classified as a(n):

reward card

If you are expecting difficulties in making your payments, it is recommended that you:

talk to the creditors.

With a bank credit card, you can often avoid interest charges if:

the account balance is paid in full every month.