Economics FoolProof Module 1 & 2

In the module, we gave you a link to a true story called "Looking for a Roommate?". How much money did one girl lose in this Nigerian scam?

$3,500

You owe $1,000 on a credit card & choose to pay the minimum payment each month. Which answer is correct?

- Credit card companies love you when you only make minimum payments. Why? You're throwing your money away by paying extra interest each month. - Making minimum payments means it could take thirty or forty years to pay off that $1,000 credit card bill.

Which answer applies to "fine print"?

- Fine print is usually where virtually all the important information is located. - You should always read the fine print. - The fine print is always the print you want to ignore. - Many companies like fine print because you can be confused by it, & make the wrong decision.

Which two statements give good definitions of financial credit?

1. Financial credit is an arrangement for you to pay at a later date. Loans & credit cards are forms of credit. 2. Financial credit is one way that lenders, businesses, & employers may judge an individual's trustworthiness.

Good credit gives you options. Bad credit takes away your options. Choose the one correct answer.

1. You have good credit. You can choose the credit card with the lowest interest rate. 2. You have bad credit. You are forced to take the credit card which charges rip-off rates.

If you mismanage your checking account by bouncing checks repeatedly or ignoring overdraft notices, which of the following results may happen to you?

All of the above

Do many companies like it when you look like a fool?

Definitely. The job of many companies is to make money, not to do what is right for you. If you look like a fool, they make more money.

What is FoolProof's definition of "looking like a fool"?

Falling for anything which makes companies & other people think you're too stupid or too young to know better.

T/F: Most online financial institutions & businesses will regularly send you emails asking you to update your account information by going to a link in their email.

False

T/F: You have to be rich to have a good credit score.

False

T/F: Your parents' credit score determines your credit score.

False

Good credit helps bring independence. Which statement best illustrates the fact that good credit helps bring independence?

Good credit can help you build a savings account. Because you pay less in interest when you have good credit, you are able to save more. Money in your pocket always gives you more options than not having money in your pocket.

Good credit equals power. Which statement illustrates that power?

Having good credit impacts what job you get & what you pay for products & services.

Vinnie had many credit cards, & he did have fun with them. Then he nearly went broke. What was the main thing Vinnie did wrong?

He used one credit card to pay other credit card bills.

What is a "debt-to-income" ratio?

How much money you owe in total versus how much you make.

Paid "as agreed" means you paid your account on or before the "due date". Which statement describes the smartest move, when it comes to paying your accounts?

I always pay my accounts days early.

Which statement is true?

It's really easy to mess up your credit score

Which of the following people has "paid on time," an important requirement in credit agreements?

Josh has a 36-month loan for his new truck. Each month's payment is due by the 10th of the month. Josh always mails his coupon & payment by the first of the month.

What is the best way to improve your credit?

Make all your payments on time, every time.

You loan your cell phone to a pal who runs up your bill. Whose credit will be hurt if the bill isn't paid?

Mine - I am always responsible for my accounts

What answer best describes a Nigerian scam?

Nigerian scammers nearly always want you to send money back to them.

What statement is TRUE about "phishing scams"?

Phishing scams cannot hurt you if you do not respond to them.

Why would the length of time you have had a checking or savings account help determine your credit score?

Potential lenders, businesses or employers want to see your track record, how you pay over a long period of time. Anybody can make one payment on time. What counts is how you pay over time.

You own a credit bureau. You're trying to decide which person is the better credit risk. Which statement would you choose as the best credit risk?

Ted is just about to pay off his 36-month loan on his used RAV4. He's made 35 monthly payments on time to his credit union & is sending the 36th payment in on time, too.

Having a bad credit history impacts every one of these items but one. Which is the one item not impacted by bad credit history?

The fact that I am a good person.

Bill shares an apartment with Matt. The lease & all the utilities are in Matt's name. Ball pays his rent, & his share of the utility bills on time. Why does this not help Bill build a positive credit score?

The lease & utility bills are not in his name.

Why do businesses or individuals considering giving you credit look at your "debt-to-income" ratio?

They want to see if you have enough total income to pay off all your bills. If you have the income to pay off all your bills, you are probably a better "risk".

How long you've had an account - like a credit card or a cell phone account - helps to determine your credit score.

True

T/F: Credit is an arrangement for you to pay at a later date. It is one way to determine trustworthiness.

True

T/F: Many companies deliberately give you repayment plans that make sure it will take you decades to pay your debt.

True

How many new accounts you have plays a role in your credit rating. In fact, too many new accounts usually hurt your credit rating. Choose the example which shows too many new accounts.

You get lots of offers for credit cards, & get five within a month.