Personal Finance - Chapter 6 Quiz
To improve your credit score:
- avoid applying for new credit cards - pay your bills on time - understand the computation of outstanding debt
Following ways that represent the improper use of credit.
- bankruptcy - default and loss of credit rating
It is illegal to deny credit based on:
- child bearing possibility of applicant - sex of applicant - age of a 70 year old
Examples of open-end credit
- department store credit card - using a bank credit card - overdraft protection
What is the procedure under consumer credit laws when denial of credit is discriminatory?
- make the creditor aware of your understanding of the law - sue the creditor - file a complaint with the government
Ways to improve your credit score:
- pay your bills on time - understand the computation of outstanding debt - avoid applying for new credit cards
Three types of closed-end credit?
- single lump-sum credit - installment cash credit - installment sales credit
What you should consider when determining whether you can afford a loan.
- your monthly expenses - your monthly pay - funds remaining for other expenses
Which of the following is the ideal, not maximum, debt payment-to-income ratio?
15%
The maximum debt payment-to-income ratio that is acceptable is around _____%.
20%
Economists now recognize ___________ ____________ as a major force in the U.S. economy,
Consumer credit
Which of the following is the best description of the importance of consumer credit in the United States?
Consumer credit is a major force in the US 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 services now and pay for them in the future.
The law that protects consumers by setting standards for correcting billing mistakes and allowing customers to avoid paying for defective merchandise is called:
Fair Credit Billing Act
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
Credit allows your to buy clothes today and pay for them in the _________.
Future
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 situations will credit provide an opportunity for a more efficient and productive life?
Loan for business operations
Who can a victim of identity theft call to network with other victims?
The Privacy Rights Clearinghouse
The Act that prohibits creditors from giving inaccurate information or denying consumers the right to cancel credit accounts is:
The Truth in Lending Act
True or False: A credit bureau is a reporting agency that collects credit and other information about consumers.
True
True or False: A reliable way to see if you can afford a loan is to determine what you will give up to make the monthly loan payment.
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: The ECOA protects individuals from discrimination in credit transactions on the basis of factors including race, color, age, sex, and marital status.
True
What is the proper way to correct a billing error?
Write a clear letter reporting the error to the credit agency.
What is a credit bureau?
a reporting agency that collects information on how promptly people and businesses pay their bills
A line of credit is:
an open-end type of credit that the lender makes available to the borrower
Typically, qualified cosigners:
are able to pay loan payments
When cosigners sign their loans, they:
are stating that they are able to pay for the loan if required.
Which of the following is not a valid reason for using credit?
borrowing for everyday expenses
An example of _______ -end credit is an automobile loan, whereas an example of ______- end credit would be a credit card.
close, open
A loan for a motorcycle is an example of ______.
closed-end credit
A line of ____ is the maximum amount of funds lent to a consumer.
credit
Closed-end credit is paying back a loan:
in a specified period of time and in payments of specified amounts
What does the Fair Credit Billing Act (FCBA) do?
it protects consumers with billing mistakes and provides assistance in avoiding payment for defective merchandise.
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
The five Cs refer to:
policies that help determine who will receive credit
If you have a complaint about a business while dealing with identity theft issues, you can file a complaint with:
the Federal Trade Commission
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 an item because it is defective.
The most important thing you can do to improve your credit score is to pay your bills on _________.
time
The _______ in Lending Act prohibits creditors from giving inaccurate information or denying consumers the right to cancel credit accounts.
truth
When you are applying for a bank loan, the bank will:
use the five Cs when determining your creditworthiness
