W!SE Questions 3
When you mail your credit card payment on the due date, your payment will be considered:
A: Late, and the company will assess you a late fee Reason: A credit card payment is considered to have been made on the date the payment is posted to the account, not when it is mailed. Since it takes several days for the payment to reach the creditor and go through the posting process, your payment would not be posted to your account "by" the due date and thus would be a late payment.
The definition of credit is:
A: Using someone else's money, promising to repay in the future for a fee Reason: The key elements of credit are using someone else's money, paying it back, and paying interest. Credit has a cost just like any other good or service, and the cost of credit is the interest. If you do not promise to pay the money you borrow in the future, the money received would be considered a gift.
When a person brings an item to a pawnshop to obtain cash, the transaction is considered
A: a collateralized loan. Reason: Since pawnshops make loans based on determining the value of collateral (a tangible object such as jewelry, cameras, musical instruments) they receive, the loan is considered a collateralized loan.
What is meant by an uncollateralized loan?
B: A personal loan without assets to cover the loan amount. Reason: Collateral? is a tangible asset that is used to secure a loan. In the case of a mortgage, the actual house or apartment serves as the collateral for that loan. The same is true of a car loan. If the person who takes the loan, defaults on that loan, the bank or other lending agency has the right to keep the collateral. Therefore, an ?uncollateralized loan? is one that does not have an asset to support the loan.
How can you protect yourself against credit card fraud?
B: Be extremely careful about disclosing account information to unsolicited callers. Reason: Preventive measures are always the best safeguard. Potential credit issuers need to know some personal information in order to learn about your credit history and determine your credit-worthiness. Information is power; keep yours secure, and give it out only when you make the call.
Which factor would most likely lead to an increase the interest rate on a person?s credit card?
B: Late payments. Reason: Before setting interest rates, credit card companies look at the individual?s capacity to repay outstanding obligations. If the capacity is limited then the person is likely to make late payments.
Dawn graduated from high school and wants to get a credit card. How can Dawn establish credit-worthiness?
B: Opening a checking account, making regular deposits, and avoiding penalties for insufficient funds Reason: To establish credit-worthiness, Dawn must have credit and use it responsibly. Creditors will only give new debtors small amounts of credit because creditors cannot tell whether the applicant is likely to use the credit responsibly. Having a checking account in good standing helps you to establish a record of being responsible.
Sue bought a copy of her credit report, and found incorrect information in it. She can:
B: Request that the credit bureau correct her credit report Reason: If requested by the consumer, the credit bureau must reinvestigate the challenged information on a credit report, and then modify, or remove inaccurate information. The consumer cannot be charged a fee for the investigation or credit report correction. If the reinvestigation does not resolve the matter, you may file your version of the story in a brief statement, and the credit bureau must include your statement in all future reports containing the disputed item. You may also request that the credit bureau send copies of your corrected statement to anyone who has received a credit report containing the disputed item during the last six months (two years for employment reports).
When a person declares bankruptcy that fact will appear on the person?s credit report
B: for a 10 year period. Reason: Most of the adverse information on a credit report appears for 7 years. After a declared bankruptcy, the limit is 10 years.
You used your credit card to buy flowers at the florist. The dollar amount of the purchase was:
C: Added to your credit card bill and you pay for it at a later date Reason: The purchase amount is immediately added to the credit card account balance by the credit card company. Your credit card statement is generated once a month on the billing cycle date.
Which of the following is considered to be open-end credit?
C: Department store charge cards. Reason: Open-end credit is a revolving live of credit that is offered by banks and other lenders to consumers. There is a limit set on the line of credit and the funds, products or services are accessed using a credit or debit card, check, store charge card or cash advance. Consumers pay interest on the outstanding balance. A car loan is made for a specified amount and a specific length of time and is therefore considered closed-end credit. A mortgage loan is also considered a form of closed-end credit since the house serves as collateral for the loan which is made at a specified interest rate for a specified time period.
A person has three credit cards with very large outstanding balances and is unable to make payments on any of them. Which action should the person take?
C: Notify the credit card companies in order to negotiate a new payment plan. Reason: When experiencing financial difficulties, the first action to take is to notify creditors, in this case the three credit card companies. Quite often the company will assist in negotiating new terms.
Consumers who file for bankruptcy are still responsible for:
C: Tax claims and student loans Reason: Types of debts that are not discharged by a bankruptcy include some tax claims, alimony, child support, most student loans, claims for punitive damages for malicious or reckless acts such as driving under the influence (DUI), and state and federal income taxes.
To qualify for a Federal Housing Administration (FHA) loan, a person must generally
C: fulfill income guidelines. Reason: The Federal Housing Administration (FHA) insures lenders who make mortgage loans that are riskier than regular bank loans because FHA loans are made to individuals who usually would not qualify for regular low-cost mortgages from banks (usually first-time home buyers with lower income and a weaker credit score). The objective of this federal agency is to encourage home ownership while helping to protect the lenders at the same time
To qualify for a Federal Housing Administration (FHA) loan, a person must generally
C: fulfill income guidelines. Reason: The Federal Housing Administration (FHA) insures lenders who make mortgage loans that are riskier than regular bank loans because FHA loans are made to individuals who usually would not qualify for regular low-cost mortgages from banks (usually first-time home buyers with lower income and a weaker credit score). The objective of this federal agency is to encourage home ownership while helping to protect the lenders at the same time.