chapter 7 personal finance

identity thieves that have systematically infiltrated corporations and financial institutions in order to facilitate large-scale identity thefts are usually a part of

a well-organized crime ring

generally, the ____ the credit history, the _____ the credit limit

better, higher

all of the following situations are valid reasons to borrow funds except

borrowing for everyday living expenses

of the following situation, which is not an advantage of using credit

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

which of the following can be used by a creditor in deciding whether or not to grant credit

credit history

a commitment by insurance company to cover credit repayments under advance conditions such as accident or illness is called

credit insurance

which of the following statements is true regarding non-installments credit

credit is usually issued for 30 days or less

the ____ is a document showing information reporting your payment history and past use of credit

credit payment history

the _____ is the most important factor used in the FICO credit scoring model

credit payment history

the item that receives the most weight in the FICO credit scoring system is

credit payment history

which of the following may result in much of your personal financial information becoming part of the public record

divorce

which of the following items should not be removed from your wallet

drivers license

going through documents discarded by your bank to obtain information i order to access your bank account is an example of

dumpster diving

the federal law that prohibits the denying based on gender, age, race, national origin, religion, or martial status is the _____-

equal credit opportunity act

the law that prohibits denying credit due to gender, age, race, national origin, religion, or marital status is

equal credit opportunity act

____,_____,____ are the three major credit bureaus

equifax, experian, transunion

the use of credit may result in _____ spending and ____ debt

excessive, increased

which of the following is not ONE of the three primary credit bureaus

fair isaac corporation

credit issued by department stores for relatively long periods of time is called non-installment credit

false

funds provided by a borrower that will be repaid in the future, with interest, is credit

false

identity theft only occurs through individuals who do not have legitimate access to your information

false

if you refrain from using any credit, it will assure you the lowest possible interest rate when you decide to use it

false

it is easier to pay back what you borrow than to obtain credit in the first place

false

obtaining money, goods, and services are the only reasons for identity theft

false

revolving open-end credit typically does not specify a maximum amount that can be borrowed

false

the credit CARD act of 2009 made it easier for college students to obtain credit cards

false

the equal credit opportunity act allows a creditor to deny credit based on a persons age

false

the longer you maintain relationships with creditors, the lower will be your credit score

false

transunion is not one of the three primary credit bureaus

false

unless your identity is stolen by someone out of state, you should only report the crime to local law enforcement

false

using a shredder to destroy personal data will protect you from shoulder surfing

false

with a credit score of over 500, you should have no problem getting approval for credit purchases

false

you should be very selective in shredding documents and when in doubt, do not shred them

false

creditors prefer a ____ amount of capital and ____ collateral in the best of circumstances

high, high

creditors prefer a ______ level of cash inflows and ____ level of cash outflows

high, low

credit scores in the 500-600 range will likely result in

higher interest rates

which of the following is NOT true regarding revolving open-end credit

if the balance is not paid off over a period of months, a penalty is incurred

which of the following is the best rule to follow in shredding information

if you have any question, shred it

the ability to save funds is ____ when credit payments are _____

increased, small reduced, large

advantages of using credit are all of the following except

increases the number of check written

______ is a borrowing arrangement in which regular monthly payments of principal and interest must be made

installments credit

of the following statements, which is not a disadvantage of using credit

it is more difficult to obtain than repay

which of the following statements is NOT true regarding reviewing your credit report

it will help you determine if there are credit cards that you should apply for to improve your credit standing

why is it so important that you make all of your credit and loan payments on time

late payment history lasts 7 years on your credit file

improper use of credit may

make it necessary to file for bankruptcy

which of the following is not a disadvantage of using credit

makes it easier to save

which of the following will not help you establish a good credit history

making as many purchases as possible with cash

which of the following is NOT a factor in the FICO credit scoring

martial status

____ is short-term credit provided by some department stores to consumers to purchase specific items

non-installment

credit extended to consumers for short periods of time to make specific purchases is

non-installment credit

you are ready to make a new car purchase and the manufacturer is offering a 60 month, zero percent interest loan, or, a $1500 cash rebate. the price of the car is $25,000. which option should you choose

not enough info

if you receive a phone call that seeks to verify or update personal information you should

obtain the persons name and phone number and call the company to verify his or her credentials

you should review your credit report from each credit bureau at least

once a year

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

pharming

using e-mail messages that pretend to be from a legitimate source to obtain account information for the purpose of identity theft is referred to as

phishing

posing as an employee of a brokerage firm to obtain information to allegedly update your account information is an example of

pretexting

____ is a credit arrangement where the balance may be paid off monthly and interest is only charged on the remaining unpaid amount

revolving open end credit

which of the following is the least common manner in which an identity theft victim discovers the crime

routine examination of a credit report

if you plan on using your credit card to carry a balance for more than a month or two, you should

should around to find the lowest interest rate card on the market before you make the purchases

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

shoulder surfing

identity thieves that obtain your information from the magnetic strip on your credit card are using a technique known as

skimming

the widespread adoption of EMV technology is likely to reduce

skimming

which of the following is a disadvantage of using credit

slowing of progress towards financial goals

all of the following are correct statements about credit EXCEPT

the interest is the total amount to be repaid

an advantage to credit is it eliminates the need for writing checks

true

credit cards are an example of revolving open-end credit

true

excessive use of credit can impair your ability to save money

true

federal law requires creditors to explain the reasons for the denial of credit

true

historical credit problems normally remain on a credit bureaus report for seven years and ten years for bankruptcy

true

if you are a victim of identity theft, you may be turned down for employment as a result of incorrect background information

true

if you find that you will not be able to make credit payments on time, the best course of action is to immediately inform the creditor

true

in order to have good credit in the future, you must have used it wisely in the past

true

most identity theft victims discover the crime in a reactive as opposed to a proactive manner

true

posing as an employee of a financial institution to obtain information for purposes of identity theft is an example of pretexting

true

the fair credit reporting act requires bureaus to correct any erroneous information on your credit report

true

the fair reporting act limits the sharing of credit information

true

the most important element in FICO credit scoring is your payment history

true

the personal cost of identity theft is difficult to measure, but calculating the financial cost is an easier task

true

the proper use and control of credit is the best way to build a good credit history

true

using more credit than can be repaid is a primary cause of individual bankruptcy

true

when creating credit scores, credit bureaus rely on a model career by the fair isaac corporation

true

you can begin to build a credit history by using utility services

true

your credit report can be requested online and should be checked periodically for errors

true

a _____ extends credit by providing a service and billing for the service at the end of the time period

utility company

the minimum credit scare required by financial institutions

varies by institution

building a strong credit file when you are in college and beginning your career is

wise so that you will have to pay interest on the deferred amounts

free credit reports are accessible to all US consumers at

www.annualcreditreport.come

which of the following will not be included on your credit report

FICO score

according to the federal trade commission, the average individual loss as a result of identity theft is about

$1,500

the average credit card balance of undergraduate students including those with a zero balance is between

$200-$700

what steps can you take to improve your credit score

1. catch up on late payments 2. reduce unnecessary expenditures 3. destroy credit cards to reduce temptation 4. notify creditors of late payment and work out arrangements to pay

3 disadvantages of using credit

1. high cost of using credit 2. difficulty in repayment 3. impulse purchases that you cannot afford

factors that are used in determining credit scoring in the FICO model

1. paying your bills on time over the last 7 years 2. the amount of credit used each month 3. length of relationship with creditors 4. number of recent credit inquiries

paying your phone bill and electric bill each month will help you to establish a

credit history

historical credit problems remain on a credit bureaus report for _____ years while a bankruptcy remains for _____ years

7, 10

a credit score of _____ would normally allow you to have easy approval for credit

700

very high credit scores are considered anything over

700

which of the following is not a step you should take to try to improve your credit score

applying for more credit cards

identity theft occurs when an individual obtains, without your permission, any of the following information EXCEPT

date and place of birth

the impact of credit ______ saving and ______ spending

decreases, increases