personal finance chapter 6 test

you receive a bill in the mail that is not yours, but it has your name on it, what is the first thing you should do?

call the creditor and ask them for help figuring out the bill

what's the difference in closed- end credit, vs open- end credit

closed end is a onetime loan you pay back over a period of time and an open end is a credit with a certain limit you can borrow

bankruptcy is a great way to get out of debt true or false?

false

what are three steps you can take to maintain a good credit rating?

1. Maintain a good debt-to-income ratio (20% or less). 2. Make loan payments on time. 3. Pay credit cards in full monthly and any monthly loan payment in full.

how long does the creditor have to respond?

30 days to acknowledge your letter and then 2 billing cycles to fix it

credit scores can go up or down true or false?

true

Adrian is trying to decide whether he can afford a loan so he can go to college. Right now, Adrian lives in a dorm and works in a grocery store earning a gross income of $545 per month. Adrian pays $100 on credit cards each month. The loan he needs will cost another $200 per month. Help Adrian make the decision by calculating the debt payments to income ratio with AND without the college loan.

55%, 18%

what are two disadvantages of using credit?

temptation to buy more than you can afford and if you fail to repay a loan, you can lose your good credit reputation

why are there different credit scores?

there are 3 different credit agencies

what is credit?

an arrangement to receive cash, goods, or services now and pay for them in the future

what should you do if you think a bill is wrong?

call and discuss the situation calmly to the creditor

what are the 5 C's of credit?

credit history, character, collateral, capacity, and capital

based on trends listed in the book, in class, and in the world today, the percentage of Americans declaring bankruptcy is likely to decrease in the future true or false?

false

suppose a good friend asks you to cosign a loan for a car, you know they are horrible with paying their bills, list 2 reasons why it's a bad idea

if the borrower does not pay the debt, you may have to pay up to the full amount of the debt as well as any late fees or collection costs. if the debt is not repaid, that fact will appear on your credit record.

what is a difference between chapter 7 and chapter 13 bankruptcy?

in Chapter 13 the debtor keeps most of their property but pays all debt off over several years

what are two advantages of using credit?

let's you enjoy goods and services now and pay for them later and you might need them when making a reservation

what is the debt-to-income ratio formula

monthly debt payments/ monthly net income= debt to income ratio

what are some ways to protect yourself against identity theft?

store your card in a safe place, get your card back after a purchase, and store card number and information in a safe spot at home

an example of an inexpensive loan is a loan from your parents true or false?

true

your credit report contains your personal information, credit history, public records, and inquiries into your credit history true or false?

true

which of the following is NOT a warning sign of debt problems: -you always pay monthly, in full, on time. -you make only minimum payments on credit cards. -you borrow money to pay debt. -you miss loan payments or make them late.

you always pay monthly, in full, on time.