Chapter Seven: Personal Finance
A) extends credit by providing a service and billing for the service at the end of the time period B) a borrowing arrangement in which regular monthly payments of principal and interest must be made 35) installment credit 36) telephone company
35) B 36) A
Very high credit scores are considered anything over ________.
700
) The minimum credit score required by financial institutions A) varies by institution. B) is 500. C) is 550. D) is 600.
A
) 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 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
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
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
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
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
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
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
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
) 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
) 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
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
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
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
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
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
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
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
Generally, the ________ the credit history, the ________ the credit limit. A) better; lower B) worse; higher C) better; higher D) None of the above.
C
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
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
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
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
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
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
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
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
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
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
True or False Historical credit problems normally remain on a credit bureau's report for seven years and ten years for bankruptcy.
True
True or False If you are a victim of identity theft, you may be turned down for employment as a result of incorrect background information.
True
True or False If you find that you will not be able to make credit payments on time, the best course of action is to immediately notify the creditor.
True
True or False In order to have credit in the future, you must have used it wisely in the past.
True
True or False Posing as an employee of a financial institution to obtain information for purposes of identity theft is an example of pretexting
True
True or False The Fair Credit Reporting Act requires credit bureaus to correct any erroneous information on your credit report.
True
True or False The Fair Reporting Act limits the sharing of credit information.
True
True or False The most important element in FICO credit scoring is your payment history.
True
True or False The personal cost of identity theft is difficult to measure, but calculating the financial cost is an easier task.
True
True or False The proper use and control of credit is the best way to build a good credit history.
True
True or False Using more credit than can be repaid is a primary cause of individual bankruptcie
True
True or False You can begin to build a credit history by having telephone service.
True
True or False Your credit report can be requested on line and should be checked periodically for errors.
True
You should review your credit report at least ________.
Twice a year
True or False The longer you maintain relationships with creditors, the lower will be your credit score.
False
True or False TransUnion is not one of the three primary credit bureaus.
False
True or False Unless your identity is stolen by someone out of state, you should only report the crime to local law enforcement.
False
True or False With a credit rating of over 500, you should have no problem getting approval for credit purchases.
False
True or False You should be very selective in shredding documents and when in doubt, do not shred them
False
True or FAlse Most identify theft victims discover the crime in a reactive as opposed to a proactive manner
True
True or False An advantage to credit is it eliminates the need for writing checks.
True
True or False Credit cards are an example of revolving open-end credit.
True
True or False Excessive use of credit can impair your ability to save money.
True
True or False Federal law requires creditors to explain the reasons for the denial of credit.
True
True or False For creating credit scores, credit bureaus rely on a model created by the Fair Isaac Corporation.
True
A) the most important factor used in the FICO credit scoring model B) credit arrangement where the balance may be paid off monthly and interest is only charged on the remaining unpaid amount C) document showing information reporting your payment history and past use of credit 31) credit report 32) credit payment history 33) revolving open-end credit
31) C 32) A 33) B
What steps can you take to improve your credit score?
A) catch up late payments; B) reduce unnecessary expenditures; C) destroy credit cards to reduce temptation; D) notify creditors of late payment to work out arrangements
) Discuss at least three disadvantages of using credit.
A) high cost of using credit; B) difficulty in repayment; C) impulse purchases that you cannot afford; D) reduces your ability to save; E) potential bankruptcy
Discuss the factors that are used in determining credit scoring in the FICO model.
A) paying your bills on time over the past seven years; B) the amount of credit used each month; C) length of relationship with creditors; D) number of recent credit inquiries
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
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
The cost of using credit may result in ________ spending and ________ debt. A) controlled; reduced B) excessive; increased C) excessive; reduced D) controlled; increased
B
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
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
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
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
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
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
) 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
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
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
True or False The Equal Credit Opportunity Act allows a creditor to deny credit based on a person's age
False
Paying your phone bill and electric bill on time each month will help you to establish a(n) ________.
Credit History
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
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
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
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
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
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
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
Which of the following is not one of the three primary credit bureaus? A) Equifax B) Experian C) TransUnion D) Fair Isaac Corporation
D
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
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
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
The federal law that prohibits the denying of credit based on gender, age, race, natural origin, religion, or marital status is the ________.
Equal Credit Opportunity Act
________, ________, and ________ are the three major credit bureaus.
Equifax, Experian, TransUnion
True or False Using a shredder to destroy personal data will protect you from shoulder surfing.
FAlse
True or FAlse Identity theft only occurs through individuals who do not have legitimate access to your information.
False
True or False Credit issued by department stores for relatively long periods of time is called non-installment credit.
False
True or False Funds provided by a borrower that will be repaid in the future, with interest, is credit.
False
True or False If you refrain from using any credit, it will assure you the lowest possible interest rate when you decide to use it.
False
True or False It is always easier to pay back what you borrow than to obtain credit in the first place.
False
True or False Obtaining money, goods, and services are the only reasons for identify theft.
False
True or False Revolving open-end credit typically does not specify a maximum amount that can be borrowed.
False
True or False Students graduating from college today have an average debt of less than $1,000.
False
If you are making a purchase that you know that you will not be able to pay off for a relatively long period of time, you should seek which type of credit and why.
Installment credit. It is designed for a longer repayment period with structured monthly payments of principal and interest.
________ is short-term credit provided by some department stores to consumers to purchase specific items.
Non-installment Credit
Discuss the reasons why someone would wish to steal your identity
To obtain money, goods, and services and also to create a new identity unknown to authorities to facilitate criminal activities.