CREDIT TEST

What is a FICO score?

-a credit rating developed by Fair Isaac and Company -3 digit numbers ranging from 300 - 850 -a person has 3 different credit scores from 3 different bureaus

what is the range of a credit score

300-850

T/F: A negative credit event (bankruptcy) can have a WORSE impact on a higher credit score.

T

How do you avoid paying interest on your credit card (or any other loan for that matter)?

always make the full payment on time

why is having a thin file NOT an asset?

because it can take time to fatten up your score

why is it important to check your credit report every year from the three major credit bureaus?

because that's how your credit score is established

If the collateral for your secured loan can be taken away, why get a secured loan at all?

because they usually have lower interest rates

How could a teenager under the age of 18 get a credit card?

become an authorized user on your parent's card

what are the seven worst things for your credit report

charge offs, debt collectors, bankruptcy, foreclosure, repossession, tax liens, lawsuit

what factors determine interest rate?

credit score, loan itself, life situations, index

Where do banks get the money to lend out to consumers?

from their clients savings accounts

which types of credit involve repaying different amounts each month, depending on your activity?

grocery,gas

what does it mean that most loans are amortized?

you pay a fixed amount every month

T/F: Landlords are required to submit your payment history, which can boost your credit score.

False

How are credit cards and debit cards different? They're both linked to a checking account in different ways Some debit cards say VISA on them; credit cards don't With a credit card, you are borrowing from yourself A credit card can offer perks such as purchase protection

a credit card can offer perks such as purchase protection

How are a credit score and credit report related?

a credit score is determined by the factors in your report

what are a couple of examples of collateral for a secured loan ?

a house, a car, jewelry

Which is FALSE about what can happen if you fail to make your mortgage payments? After one missed payment, you can lose your home You will be charged fees Your credit score can take a hit Foreclosure process starts after 30 days of missed payment

after one missed payment, you can lose your home

Where can you get a free copy of your credit report? annualcreditreport.com freecreditreport.com getmycreditreport.com creditreport.gov

annualcreditreport.com

Which of the following could be a SECURED loan? Auto loan Student loan Mortgage Overdraft

auto loan, mortgage

why does the credit card company set a mimum payment so low, at only 3% of your balance?

because each payment that is processed includes interest rate charges and a possible late fee. it is likely that the payment will be less than the charges added for the month.

why is it important to build a good credit history? how can building your history from a young age benefit you?

because you are more likely to be granted loans from the loaners. building your history at a yound age will show the credit bureaus that we have had experience in managing credit and show responsibility

How can you build a positive credit history as a college student? Get a credit card but don't use it to avoid more debt Spend up to your credit limit each month Become an authorized user on an adult's card Make only the minimum payment each month

become an authorized user on an adult's card

What can debt collectors do if you don't make payments towards your loans? Have you arrested if you owe money They can try contacting you at work Call you between 8am-9pm to talk to you about your loans Reach out to your friends about the debt you owe

call you between 8am-9pm to talk to you about your loans

what are the top two things that you will have to keep in mind to make sure you avoid making poor credit decisions?

check with your card issuer to make sure your credit activity is being reported to the 3 credit bureaus, use credit responsibly

All of the following may access your credit report EXCEPT... A landlord A future employer Colleges and universities Insurance companies

colleges and universities

identify at least three pieces of advice you would give a friend to help them manage teir new credit card and improve their credit score.

don't apply for a lot of credit, keep your balances low, develop a long credit history, build their file by getting a cellphone in their name or becoming a cosignor or getting a secured card( if they are over eighteen)

what are ways to build your credit score in school?

establish credit by sharind credit w a parent, get a cellphone, apply for credit card in name, pay off on time, don't forget other bills, keep student loans minimum

what are some things you can do to start building your credit while you're in college?

establish credit by sharing credit with a parent, get a cellphone in your name, apply for credit card in name, don't forget other bills, keep student loans minimum

Which types of debt usually CANNOT be erased or reduced?

federal student loans

What information on a Schumer Box should you focus on when choosing a credit card?

fees, grace period, annual percentage rate

what are ways you can get a credit card when you are over 18?

have an adult become a cosigner/guarantor, become a co-owner on a joint account, get a secured card

if you use a credit card and don't pay the full balance before the first bill is due, how does your credit score impact the amount of money you ultimately pay for the laptop

having a bad credit score means that you ave a higher APR which means that the interest rate on the laptop will be high. because of this, the laptop will cost you much more than what it was originally

what does a FICO score tell lenders about you ?

how responsible you are and how much of a risk it is to lend money

how does APR impact monthly payments and total interest

if you have a lower APR, you will have a monthly payment that is fewer and a lower total interest

When can personal loans be a better option than credit cards? If you want to earn rewards and enjoy travel benefits If you want a lower interest rate If you want purchase protection & warranties If you need a lump sum of money right away

if you want a lower interest rate,if you need a lump sum of money right away

What information can you find on a credit report? Your medical insurance information Your parents' and siblings' contact information Your education level Inquiries you've made on new lines of credit

inquiries you've made on new lines of credit

Your net worth... is what you owe minus what you own is your assets - your liabilities is your liabilities - your assets is what you own minus what you owe

is your assets -your liabilities, is what you own minus what you owe

why is it a bad idea to apply for too much credit within a short period of time?

it can be seen as a high risk because it looks like you are desperate for money

when it comes to credit scores, why is having a thin file not an asset?

it can take a while to fatten up your score

what is a danger of taking a variable rate loan ?

it has a chosen index : if it goes up, interest rate increases

why is the personal infomration section of the credit report so important ?

it identifies you from others

why is the personal information section of the credit report so important?

it identifies you from others

why is it important to read the fine print in your credit card's Schumer box ?

it is a summary of the costs of a credit card in which it tells you the APR, interest rates, and charges as well as fees like annual fees, transaction and penalty fees. this is important to understand because if you known you can not meet the annual fees and charges, it is not a good idea to agree to this.

what are the main advantages to a secured vrs unsecured loan?

its protected by collateral and has lower interest rates

How can having a thin file impact you? You are likely to get lower interest rates on your loans You may be offered new lines of credit in the mail Lenders may decline your application for a loan Most landlords will approve you to rent an apartment or home

lenders may decline your application for a loan

even if you have a low credit score, you may still be able to get approaced forbig loans such as a mortage or auto loan. But.... what's the catch ?

likely a higher interest rate

Aisha wants to improve her credit utilization rate. Which of the following can she do? Make several payments in the month instead of a large one Spread her spending among her 3 credit cards Keep her credit utilization rate to 55% Keep her spending all to 1 card; don't use the other 2

make several payments in the month instead of a large one, spread her spending among her 3 credit cards

Jim is 23 and has 1 credit card. What would be the best way to improve his credit score? Get 4 more credit cards in the next 3 months Diversify his credit - get an auto loan for the car he needs Make sure he makes his payments in full & on time Increase his credit utilization rate to 45%

make sure he makes his payments in full and on time, diversify his credit- get an auto loan for the car he needs

Using the debt snowball method, you make... minimum payments on all of your loans one large payment on one loan minimum payments on small loans; pay extra on large loans minimum payments on large loans; pay extra on small loans

minimum payments on large loans;pay extra on small loans

whic types of credit involve repaing a fixed amount for a fixed number of months?

mortgage, car , college loans

how can you avoid paying interest on your credit score ?

pay off your balance each month, resist tempations, use the card for needs not wants

whats the best thing you can do to keep your credit score healthy?

pay your mortgage, installment loan,credit card bills on time, do not exceed account limits, make sure none of your accounts are delinquent

list the five components that make up your credit score

payment history, credit type, how much you owe(debt), credit history, recently opened accounts

what are the components of a credit score?

payment history, how much you owe in debt, credit history, credit type, recently opened accounts

Which of the following is NOT a typical type of credit? Mortgage Overdraft Credit Card Pre-paid Debit Card

pre paid debit card

Define principal, interest, and term

principal= amount borrowed, interest= % financial insitution charges, term= amount of time you have to pay back the loan

How do federal student loans differ from private student loans?

private loan repayment may start when you are in school

Using the High Rate Method, you... pay off all your loans in the least amount of time put extra money towards loans with the lowest interest rate put extra money towards loans with the highest interest rate make one large payment on the loan with the highest rate

put extra money towards loans with the highest interest rate

what might a teenager's next step be in fixing a thin file?

strengthen your credit by making purchases that are good for your credit score

Which of the following situations is an example of responsibly taking on debt? Using your credit card for all your "wants" Taking out a Payday loan to help you pay off your auto loan Accepting all credit offers you get in the mail Taking out manageable student loans & graduating

taking out manageable student loans and graduating

Why might someone have a thin file? They've had multiple lines of credit open for 15 years They only have 4 types of credit open The credit bureaus mistakenly think you have passed away You are relatively new to establishing credit

the credit bureaus mistakenly think you have passed away, you are relatively new to establishing credit

what happens if you make the minimum payment each month ?

the less you pay now,the more you repay later, you could pay multiple times the original price

How do banks make money off of the credit they issue?

they charge a high interest rate on the loan

what is a co-signor and what should they consider ?

they co-sign the loan: if you wipe out on the loan, they are responsible to pay the loan

True or False: A cosigner's credit history can be affected by the loan they are cosigned on

true

what is a thin file

when you don't have enough information in your credit report to have a credit score

Which of the following does NOT contribute to your credit score? Your payment history Which banks issued your credit cards Your debt-to-credit ratio Length of credit history

which banks issued your credit cards

Why does the amount of INTEREST you owe on a loan decrease over time?

with each payment, principal decreases, as interest decreases

Which is TRUE about Payday loans? You can pay them back in installments You are charged a 1-time fee for the loan Most people successfully pay these loans back You need a credit card account to get one

you are charged a 1- time fee for the loan

Which is TRUE when you make only the minimum payment each month? You are charged interest on the remaining balance Your credit line is restored to its maximum amount Credit card companies have permission to sell your info It is the fastest way to pay off your debt

you are charged interest on the remaining balance

why might you have a thin file?

you are new to credit or re-establishing credit, the credit bureaus think you're deceased, you've never had credit, your credit file is split

When repaying your Federal student loans... repayment begins the day after you graduate a loan servicer will contact you before repayment begins you are required to begin with the Standard Repayment Plan you can choose from different repayment plans

you can choose from different repayment plans, a loan servicer will contact you before prepayment begins

Which of the following is TRUE about a credit report? It is a complete history of one type of credit you have Credit reports are maintained by the 5 main credit bureaus You can get a copy of your credit report for free You can get a credit report only when you're 21 years old

you can get a copy of your credit report for free

All of the following are benefits of having a good credit score EXCEPT You can get a higher return on your Retirement fund Higher interest rate on credit cards and loans Easier approval for rental apartments and houses Better car insurance rates

you can get a higher return on your retirement fund, higher interest rate on credit cards and loans

what reasons might an 18 year olf have for his or her thin file? what might be a teenager's realisitic next steps in fixing a thing file?

you have never had credit, you're new to credit or re-establishing credit, the creit bureau thinks your deceased, your credit file is split next steps: make good purchases that are good for your credit score

Which of the following is TRUE about an auto LOAN and a LEASE? You must give the car back when a lease has expired Only a loan requires some kind of upfront payment You make monthly payments on both Monthly payments tend to be lower with a lease

you make monthly payments on both, monthly payments tend to be lower with a lease

Which of the following is TRUE about finding errors on your credit report? You may have to file a dispute with each credit bureau You should wait until the end of the month before reporting Finding errors is common & is not a big deal Overlooked errors may result in you paying a fine

you may have to file a dispute with each credit bureau

if someone asked you "why should I bother worrying about my credit score" what would you say?

your credit score is very important because by developing a good credit score, you can have benefits like a lower APR, or interest and havelower monthly payments

What may NOT impact the interest rate on your loans? Your relationship with the financial institution Your credit score The loan amount Your level of education

your level of education