Chapter 7: Assessing and Securing Your Credit

The average credit card balance of undergraduate students is between A) $3,000 and $7,000. B) $1,000 and $3,000. C) $7,000 and $10,000. D) $12,000 and $15,000.

A) $3,000 and $7,000

A credit rating (score) of ________ would normally allow you to have easy approval for credit. A) 500 B) 600 C) 700 D) 1,000

C) 700

Which of the following would not help improve your credit score? A) Reducing unnecessary expenditures B) Destroying some credit cards C) Applying for more credit cards D) Notifying creditors of late payments

C) Applying for more credit cards

The law that prohibits denying credit due to gender, age, race, natural origin, religion, or marital status is A) Fair Labor Standards Act. B) the Fair Isaac Act. C) Equal Credit Opportunity Act. D) Fair Treatment of Borrowers Act.

C) Equal Credit Opportunity Act

The Identity Theft and Assumption Deterrence Act has designated which federal agency as the central clearinghouse for all identity theft complaints? A) FBI B) CIA C) FTC D) WPA

C) FTC

Which of the following federal agencies should always be notified in the event of identity theft? A) Federal Bureau of Investigation B) Secret Service C) Federal Trade Commission D) Postal Inspection Service

C) Federal Trade Commission

Which of the following is not true regarding revolving open-end credit? A) Credit cards are an example of it. B) A specific maximum amount of credit is established. C) If the balance is not paid off over a period of months, a penalty is incurred. D) Interest is charged on the remaining balance each month.

C) If the balance is not paid off over a period of months, a penalty is incurred.

Free credit reports are accessible to all U.S. consumers at A) www.creditreport.com. B) www.freecreditreport.com. C) www.annualcreditreport.com. D) www.experian.com.

C) www.annualcreditreport.com

The ability to save funds is ________ when credit payments are ________. A) increased; small B) reduced; small C) reduced; large D) Both A and C are correct.

D) Both A and C are correct.

Which of the following may result in much of your personal financial information becoming part of the public record? A) Marriage B) Applying for financial aid at a college C) Purchasing a house with a mortgage D) Divorce

D) Divorce

Which of the following items should not be removed from your wallet? A) Social Security card B) Birth certificate C) Infrequently used credit cards D) Drivers license

D) Drivers license

Which of the following is not one of the three primary credit bureaus? A) Equifax B) Experian C) TransUnion D) Fair Isaac Corporation

D) Fair Isaac Corporation

All of the following situations are valid reasons to borrow funds except A) a medical emergency. B) a college education. C) purchasing a car in order to return to the workforce. D) borrowing for every day living expenses.

D) borrowing for every day living expenses

Which of the following statements is true regarding non-installment credit? A) The borrower has a longer time to repay B) Monthly payments of principal and interest must be paid C) The borrower has an unlimited amount of credit D) Credit is usually issued for 30 days or less

D) credit is usually issued for 30 days or less

The safest way to order merchandise using a credit card is by A) cell phone. B) computer. C) hand-held phone. D) land line phone.

D) land line phone

Which of the following will not protect you from identity theft while on vacation? A) Carry all credit cards, passports, and birth certificates with you B) Have your mail stopped C) Do not leave credit slips in restaurants D) Do not leave sensitive information in your hotel room when you are not there

A) Carry all credit cards, passports, and birth certificates with you

Which of the following can be used by a creditor in deciding whether or not to grant credit? A) Credit history B) Race C) Gender D) Both A and C

A) Credit history

Which of the following is the best rule to follow in shredding information? A) If you have any question, shred it B) Anything with your name and address on it received through the mail C) Only items received from your bank or brokerage firm D) Any item received that is first class mail

A) If you have any question, shred it

Which of the following is not a disadvantage of using credit? A) Makes it easier to save B) The potential high cost C) The difficulty in paying back loans D) The potential for personal bankruptcy

A) Makes it easier to save.

Which of the following is the least common manner in which an identity theft victim discovers the crime? A) Routine examination of a credit report B) Receiving a collection notice C) Being denied credit D) Reviewing a credit card statement

A) Routine examination of a credit report

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 A) pharming. B) phishing. C) skimming. D) trolling.

A) pharming

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 A) shoulder surfing. B) dumpster diving. C) pretexting. D) skimming.

A) shoulder surfing

When making purchases on line, you can take all of the following steps to recognize and avoid identity theft except A) use your cell phone to place credit card orders. B) use a secure browser. C) read the privacy policies of the web sites you visit. D) don't download files sent to you by strangers.

A) use your ell phone to place credit card orders.

The minimum credit score required by financial institutions A) varies by institution. B) is 500. C) is 550. D) is 600.

A) varies by institution

Which of the following will not be included on your credit report? A) Social Security number B) FICO score C) Unpaid accounts D) Companies that have recently accessed your report

B) FICO score

Which of the following statements is not true regarding reviewing your credit report? A) You will be able to determine if any errors have been made so they can be corrected. B) It will help determine if there are credit cards that you should apply for to improve your credit standing. C) It will reveal the kind of information that lenders will consider when making a decision to extend credit. D) Will reveal deficiencies that you can work to eliminate that will improve your credit rating.

B) It will help determine if there are credit cards that you should apply for to improve your credit standing.

Of the following statements, which is not an advantage using credit? A) Credit creates stability and allows you to establish a favorable credit history. B) Buying today and paying tomorrow seems ideal, but continual spending can lead to financial problems. C) Using credit is safe since charge accounts and credit cards let you shop and travel without carrying large amounts of cash. D) Credit cards permit the purchase of goods even when cash funds are low.

B) buying today and paying tomorrow seems ideal, but continual spending can lead to financial problems

A commitment to cover credit repayments under adverse conditions such as accident or illness is called A) accident insurance. B) credit insurance. C) health insurance. D) unemployment insurance.

B) credit insurance

The item that receives the most weight in the FICO credit scoring system is A) the amount of credit used each month. B) credit payment history. C) credit utilization. D) credit inquiries.

B) credit payment history

Identity theft occurs when an individual obtains, without your permission, all of the following information except A) Social Security number. B) date and place of birth. C) drivers license number. D) bank account number

B) date and place of birth.

The impact of credit ________ saving and ________ spending. A) increases; decreases B) decreases; increases C) decreases; decreases D) Credit has no relationship on saving and spending.

B) decreases; increases

Obtaining information in order to steal your identity from documents discarded by your bank is an example of A) shoulder surfing. B) dumpster diving. C) pretexting. D) skimming.

B) dumpster diving

The cost of using credit may result in ________ spending and ________ debt. A) controlled; reduced B) excessive; increased C) excessive; reduced D) controlled; increased

B) excessive; increased

Creditors prefer a ________ level of cash inflows and ________ level of cash outflows. A) low; low B) high; low C) high; high D) medium; low

B) high; low

Credit scores in the 500-600 range will result in A) lower interest rates. B) higher interest rates. C) automatic acceptance of your credit application. D) preferential treatment of your application.

B) higher interest rates.

Advantages of using credit are all of the following except A) the ability to cover cash flow shortages. B) increases the number of checks written. C) the ability to buy large items earlier. D) convenience in making day-to-day transactions.

B) increases the number of checks written

Improper use of credit may A) increase your ability to save money. B) make it necessary to file for bankruptcy. C) increase your personal wealth. D) All of the above.

B) make it necessary to file for bankruptcy

Credit extended to consumers for short periods of time to make specific purchases is A) installment credit. B) non-installment credit. C) revolving open-end credit. D) minimum limit credit.

B) non- installment credit

Using e-mail messages from a legitimate source to obtain account information for the purpose of identity theft is referred to as A) pharming. B) phishing. C) skimming. D) trolling.

B) phishing

Historical credit problems remain on a credit bureau's report for ________ years while a bankruptcy remains for ________ years. A) ten; twenty B) seven; ten C) eight; fifteen D) five; ten

B) seven; ten

At your place of employment, which of the following is acceptable? A) Use of your Social Security number as an employee number on your time card B) Inclusion of your Social Security number on your employee identity badge C) Inclusion of your Social Security number on your payroll registry in the accounting office D) Inclusion of your Social Security number on your paycheck

C) Inclusion of your Social Security number on your payroll registry in the accounting office

Of the following statements, which is not a disadvantage of using credit? A) It can be costly to use. B) It can be difficult to repay if overused. C) It is more difficult to obtain than repay. D) It may tempt you to make impulse purchases.

C) It is more difficult to obtain than repay.

Which of the following will not help you establish a good credit history? A) Paying your phone bill on time B) Financing a car and making payments on time C) Making as many purchases as possible with cash D) Never exceeding your credit limit on your credit card

C) Making as many purchases as possible with cash

Which of the following is not a factor in the FICO credit scoring? A) Credit utilization B) Length of relationship with creditors C) Marital status D) Number of inquiries

C) Marital status

Which of the following would not be contacted in all cases of identity theft? A) Local law enforcement B) Federal Trade Commission C) Postal Inspection Service D) The three major credit bureaus

C) Postal Inspection Service

Which of the following is a disadvantage of using credit? A) Ease of returning merchandise B) Shopping convenience C) Slowing of progress toward financial goals D) Capacity to access credit in the future

C) Slowing of progress toward financial goals

Identity thieves that have systematically infiltrated corporations and financial institutions in order to facilitate large-scale identity thefts are usually a part of A) the Federal Trade Commission. B) The Internal Revenue Service. C) a well-organized crime ring. D) a political party

C) a well-organized crime ring.

Generally, the ________ the credit history, the ________ the credit limit. A) better; lower B) worse; higher C) better; higher D) None of the above.

C) better; higher

If you think that your identity has been stolen, the FTC recommends you do all of the following except A) contact the credit bureaus. B) file a police report. C) destroy all of your credit cards. D) call your creditors

C) destroy all of your credit cards

Creditors prefer a ________ amount of capital and ________ collateral in the best of circumstances. A) low; low B) high; low C) high; high D) medium; low

C) high; high

The average individual loss as a result of identity theft has in recent years been A) decreasing. B) staying the same. C) increasing. D) No pattern is discernable.

C) increasing.

Posing as an employee of a brokerage firm to obtain information to allegedly update your account information is an example of A) shoulder surfing. B) dumpster diving. C) pretexting. D) skimming.

C) pretexting

If you receive a phone call that seeks to verify or update personal information you should A) ask several questions of the solicitor to verify their authenticity. B) ask to speak to a supervisor. C) obtain their name and address in case you need to contact them in the future. D) obtain their name and phone number and call them back to verify their credentials

D) obtain their name and phone number and call them back to verify their credentials

The safest way to obtain new checks is to A) have them mailed first class to your house. B) have them mailed first class to your work. C) have them sent via United Parcel Service. D) pick them up at the bank.

D) pick them up at the bank

Identity thieves that obtain your information from the magnetic strip on your credit card are using a technique known as A) shoulder surfing. B) dumpster diving. C) pretexting. D) skimming.

D) skimming

All of the following are correct statements about credit except A) creditor provides funds. B) credit needs to be paid back in the future. C) repayment will include interest. D) the interest is the total amount to be repaid.

D) the interest is the total amount to be repaid