PF Ch. 5 T/F ?'s

False

According to law, a creditor may threaten your credit rating while you are negotiating a billing dispute

True

According to the Fair Credit Billing Act from 1975, a consumer may tell his credit card company to stop payment for a defective good if he made a sincere attempt to resolve the problem with the store

False

According to the Fair Credit Billing Act from 1975, a creditor must adjust the disputed amount in your account or tell you why the bill is correct within 30 days

False

Although credit allows immediate satisfaction of needs and desires, a greater advantage is that it increases total purchasing power

False

Closed-end credit consists of loans made on a continuous basis with periodic bills for a least partial payment

True

Closed-end credit is used for a specific purpose and involves a specific amount

False

Consumer credit allows businesses to be more efficient or more productive

True

Consumer credit dates back to colonial times when it was extensively used by farmers

False

Consumer credit refers to the use of debit cards for personal needs

True

Credit can indicate stability since lenders consider you a good risk

False

During the grace period, finance charges are assessed at only have the normal rate

True

Economists recognize consumer credit as a major force in the American economy

False

Experts suggest that you spend more than 20 percent of your after-tax income on consumer credit payments

True

FICO and VantageScore are two methods used to judge creditworthiness

False

FICO is a better score to use than VantageScore for consumers with limited credit histories

False

The higher your FICO score, the more risk you pose to creditors

True

The least expensive loans are often provided by parents or other family members

False

The longer it takes for you to pay off a bill, the less interest you pay

True

The longer the term for a loan is given interest rate, the higher the overall interest charges

False

The most expensive loans are often provided by parents or other family members

True

A credit card holder who pays the full balance during the grace period each month is actually getting a free loan from the credit card company

True

A credit file can include your spouse's name and Social Security number

False

A bankruptcy remains on a credit file for no more than 5 years

False

A consumer applies for open-end credit to make a single purchase, such a large appliance

False

A disadvantage of using credit is its use when making a hotel reservation

False

A secured credit card is most appropriate for someone with a strong credit background

False

A trade off of a credit is that it increases the amount of money that will be available to spend in the future

True

If you are a cosigner for a loan and the debt is not repaid, then that fact will appear on your credit report

True

If you purchase something with a credit card, the finance charges you pay on an item could end up being more than the item is worth

False

In the five C's of credit, capacity refers to the borrower's trustworthiness and stability

False

In the five C's of credit, capital refers to the borrower's ability to pay additional debts

True

In the five C's of credit, character refers to the borrower's trustworthiness and stability

False

In the five C's of credit, conditions refer to what will happen if the borrower does not repay the loan

True

Installment sales credit is a loan that allows a consumer to purchase high-priced items

False

Interest paid on a credit card is tax-deductible

True

Most information in your credit file may be reported for only 7 years

True

Open-end credit consists of loans made a continuous basis with periodic bills for at least partial payment

False

The Annual Percentage Rate is lower than the stated rate for loans that are repaid in monthly payments

False

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it easier for consumers to file Chapter 7 bankruptcy

False

The Equal Credit Opportunity Act requires that a lender not turn you down for credit based on your age as long as you are old enough to sign a legal contract, which is usually allowed at age 16

True

The Fair Credit Reporting Act, enacted in 1971, places limits on who can obtain your credit report

True

The Truth in Lending Act requires that creditors explain how they calculate the finance charge

False

The add-on interest calculation uses the formula: Interest = Principal x Rate of interest x Time

False

The amount of interest paid is independent of the length of the loan

False

The debt-to-equity ratio is calculated by dividing your total liabilities, including mortgage, by net worth

False

The easiest loans to obtain are also the least expensive

False

The expected rate of inflation should not be considered when determining the amount of interest a creditor should charge

True

The first sign of stolen identity might be that you get bills for a credit card account that you never opened

True

When used effectively, credit can help a consumer have more and enjoy more

False

You have a legal right to sue a credit bureau if you observe an error in your file

True

You should keep a record of your credit card number separate from your card