Personal Finance Chapter 6

Which of the following should you consider when determining whether you can afford a loan?

- funds remaining for other expenses - Your monthly expenses - Your monthly pay

Examples of open-end credit are:

- overdraft protection - using a bank credit card - department store credit card

Which of the following is the IDEAL, not maximum, debt payment-to-income ratio?

15%

What is a credit bureau?

A reporting agency that collects information on how promptly people and businesses pay their bills

Which of the following is not a valid reason for using credit?

Borrowing for every day expenses

Why should you care how to use credit?

If you misuse credit, you will pay for it with future income and it could take many years to pay off the debt.

Which of the following is NOT true?

Most credit card companies do not offer a grace period

Who can a victim of identity theft call to network with other victims?

The Privacy Rights Clearinghouse

What are the advantages to overspending with credit?

There are no real advantages to overspending on credit

An example of _____-end credit is an automobile loan, whereas an example of _____-end credit would be a credit card.

closed, open

A loan for a motorcycle is an example of:

closed-end credit

Economists now recognize _____ _____ as a major force in the U.S. economy.

consumer, credit

Purchasing a house for your growing family is an example of how credit can be used advantageously because doing so:

increases your overall well-being

A credit limit can also be called:

line of credit

The definition of open-end credit is:

loans made on a continuous basis and billed periodically for partial payment

The Fair Credit Billing Act provides that you may withhold payment on damaged or defective goods or poor services you have purchased with a credit card as long as you have

made a sincere attempt to resolve the problem with the merchant.

A line of credit is a(n) _____ ended type of credit.

open

The Act that prohibits creditors from giving inaccurate information or denying consumers the right to cancel credit accounts is:

the Truth in Lending Act

When referring to credit, character means:

the borrower's attitude toward credit obligations

The most important thing you can do to improve your credit score is to pay your bills on _____. This is a one word answer.

time

The Fair Credit Billing Act's underlining purpose is:

to protect consumer credit ratings

the borrower's attitude toward credit obligations

total monthly debt payments (excluding home mortgage) are divided by net monthly income

Rank the following items in the order they should be completed to dispute a billing error.

1. Write a letter of complaint 2. Purchase placed in dispute 3. Receive an acknowledgment from the credit company 4. Purchase removed or credit issued to account

The maximum debt payment-to-income ratio that is acceptable is around _____%. this is found in the discussion of debt-payments-to-income ratio.

20 or twenty

The _____ in Lending Act prohibits creditors from giving inaccurate information or denying consumers the right to cancel credit accounts.

Truth

Typically, qualified cosigners:

are able to pay loan payments

A loan from the bank for personal use is considered _____ cash credit.

installment

A method to confirm that you can pay for the loan is:

to have enough take home pay to cover monthly expenses, the loan payment and other expenses

What are the three types of closed-end credit?

- Installment cash credit - Installment sales credit - Single lump-sum credit

How does the Fair Credit Billing Act protect consumer credit ratings?

By allowing consumers to challenge charges that are false and avoid having delinquent charges added to their credit history

True or false: Throwing away all credit card documents is a way to prevent fraud.

False

The ECOA covers your mortgage application and bans discrimination based on race, color, age, sex, marital status, national origin, and several other factors.

True

Which of the following is part of the billing dispute process?

Writing a letter to the creditor

When cosigners sign their loans, they:

are stating that they are able to pay for the loan if required

Closed-end loans are _____ loans repaid within a(n) _____ time frame with equal payments.

(one-time, one time, installment, single, specific, or onetime) (specified, specific, set, certain, given, or fixed)

Which of the following is something that the Equal Credit Opportunity Act designed to do?

- Ensure that persons are not discriminated against because of their sex - Ensure that persons are not discriminated against based upon their age - Ensure that persons are not discriminated against because of their race

What are the factors that a creditor cannot use to deny a person credit?

- Marital status - Color - Race - Age

What is the procedure under consumer credit laws when denial of credit is discriminatory?

- Sue the creditor. - File a complaint with the government. - Make the creditor aware of your understanding of the law.

A prearranged amount of money that is accessed with special checks is called:

- a revolving check credit - a bank line of credit

It is illegal to deny credit based on:

- age of a 70 year old - child bearing possibility of applicant - sex of applicant

To improve your credit score, it is important to:

- understand the computation of outstanding debt - avoid applying for new credit cards - pay your bills on time

Installment cash credit is a form of what kind of credit?

Closed-end credit

Which of the following is the best description of the importance of consumer credit in the U.S.?

Consumer credit is a major force in the U.S. economy.

Which of the following is the main advantage of credit?

Credit allows you to enjoy goods and services now and pay later

Which of the following statements is true?

Credit is an arrangement to receive cash or goods or service now and pay for them later

True or false: Credit cards are not particularly common among consumers.

False

True or false: If you find a problem in your bill, you should notify the credit bureau in writing within 60 days.

False

True or false: When suing a creditor, you can sue for actual damages and $15,000 in punitive damages.

False

What does the Fair Credit Billing Act (FCBA) do?

It protects consumers with billing mistakes and provides assistance in avoiding payment for defective merchandise.

If you purchase a new but defective item that the business will not accept as a return, what does the FCBA require?

The credit card company will allow you to withhold payment on such item because it is defective.

A credit bureau is a reporting agency that collects credit and other information about consumers.

True

True or false: Credit is defined as an arrangement to receive cash, goods or services now with payment in the future.

True

True or false: People who have a strong willingness and ability to repay debts generally have the highest credit ratings.

True

A bank line of credit is also known as:

a revolving check credit

An example of open-end credit is:

credit cards

The law that protects consumers by setting standards for correcting billing mistakes and allowing customers to avoid paying for defective merchandise is called the ______.

fair Credit Billing Act

Credit allows you to buy clothes today and pay for them in the _____.

future or later

Closed-end credit is paying back a loan:

in a specified period of time and in payments of specified amounts

If you have a complaint about a business while dealing with identity theft issues, you can file a complaint with:

the Federal Trade Commission

When making online purchases, you should:

use a secure browser, keep a record of the purchase, and review your statement