Unit - Consumer Credit

A credit report is: Your monthly credit card statement A loan and bill payment history Your credit line with your financial institution

A loan and bill payment history

An advantage of using credit is: Less impulse buying Ability to obtain needed items now Lower chance of overspending

Ability to obtain needed items now

Which of these credit limits is reasonable for a college student? $100 $1,000 $10,000

$1,000

You obtained an installment loan of $1,400 with an annual percentage rate of 12 percent. You must repay the loan in 12 months. What is your monthly payment? http://www.franklinsavings.com/Calculator_Installment.html $124.38 $130. 67 $137.19 $146.22

$130. 67 WRONG

Using the 20-10 rule, a person earning $1,500 net income a month should not have monthly credit payments that exceed $20 $15 $150

$150

Bought a new delivery truck for $18,000 with a down payment of $4,000; paid $270 monthly for 60 months. The total finance charge is $2,000 $2,020 $2,200 $4,000

$2,200

You bought a new car for $20,000. You put down $6,000 and paid $280 for 60 months. The total finance charge is $2,800 $2,850 $3,250 $3,250

$2,800

You bought a new boat for $16,000 and put a $3,000 down payment on it. The bank's loan was for 60 months. Finance charges totaled $4,800. Your monthly payment is $269.67 $296.67 $346.67 $364.76

$296.67

What is the maturity value on a single-payment loan of $3,000 for 60 days at 11 % ordinary interest? $3,055 $3,330 $3,550 $3,660

$3,055

Calculate the average daily balance on a credit card account for the month of May. Previous balance was $600. On May 4 a payment of $200 was made. On May 8 charged$55 for gas. On May 15 returned an item for $95. On May 20 purchased groceries for $110. $452.42 $470 $600 $1,425

$470 WRONG

Your bank granted you a single-payment loan of $2,500 for 90 days at 10 percent ordinary interest. What is the interest on the loan? $33.50 $62.50 $64.75 $72.33

$62.50

Which of these APRs offers the best long-term deal? 2% introductory APR, which goes up to 23% after 6 months 10% APR, which goes up 1% every month for 10 months 15% fixed APR

15% fixed APR

Credit scores range from: zero to 100 300 to 850 100 to 1,000

300 to 850

Under the Credit Card Act, how much advance notice must be given to consumers when there are significant changes in credit card terms? 15 days 30 days 45 days 60 days

45 days

What right or responsibility is included in the Truth in Lending Act? You can get a free copy of your credit report every year from the three major reporting agencies. A creditor must give you written notice of the cost of credit and the terms of repayment before you get a loan or credit card.

A creditor must give you written notice of the cost of credit and the terms of repayment before you get a loan or credit card.

Your application for a credit card is denied. You can obtain information on your credit history under the Credit Card Act Equal Credit Opportunity Act Fair Credit Reporting Act Fair Debt Collection Practices Act

Fair Credit Reporting Act

The credit department of E-Electronic Stores often calls you at work about your overdue bill. This is a violation of the Credit Card Act Fair Credit Reporting Act Fair Debt Collection Practices Act Truth-in-Lending Act

Fair Debt Collection Practices Act

A credit card deducts money from your checking account. True False

False

All credit card companies charge an annual fee and offer rewards. True False

False

All credit cards charge the same annual fees and interest rates. True False

False

All credit cards have the same grace period. True False

False

All loans are long term. True False

False

Credit is about earning money. True False

False

Credit is free. True False

False

Credit reporting bureaus decide whether or not I can get credit. True False

False

For credit card users who do not pay the balance in full every month, the interest rate matters less than the annual fee and the rebates they earn. True False

False

If I find incorrect information on my credit report, I must hire an attorney to fix it. True False

False

Paying only the minimum down on a credit card will save you the most money. True False

False

Revolving charge accounts must be completely paid off by end of the month. True False

False

The fine print on a credit card agreement, which outlines interest rates, late payment fees, and annual fees, can be changed at any time by the credit card company. True False

False

The fee charged for the use of the credit card if not paid off in full each month? Annual Fee Interest Fee Finance Charge

Finance Charge

The finance charge is equal to the total of all monthly payments: Plus amount financed Less amount financed Divided by amount financed Multiplied by amount financed

Less amount financed

With an installment loan, the amount of money borrowed is known as the

Principle

MasterCard and Visa used on vacation Single payment credit Installment credit Revolving credit

Revolving credit

If you lose your credit card or fear it has been stolen, the first call you should make is to: The credit card issuer The Attorney General s Office The Better Business Bureau Your insurance company

The credit card issuer

Lenders consider employment record and length of time at each position. Capital Capacity Character

Character

What is the fee charged by the card issuer for being a card holder? Annual Fee Finance Charge Late Payment Fee

Annual Fee

In terms of credit, what does APR stand for? Annual Percentage Rate Annual Payment Rate Annual Payoff Rate

Annual Percentage Rate

Selling your assets to pay creditors occurs under which of the following bankruptcy filings? Chapter 7 Chapter 11 Chapter 13 Chapter 15

Chapter 7

A bank that is looking at your past payment records on your loans by examining your credit report is most likely examining which aspect of the 5 C's of lending? Character Capacity Capital Capital

Character

Most companies calculate the finance charge on credit card accounts as a percentage of the: Daily balance Weekly balance Average daily balance Average weekly balance

Average daily balance

The act of moving whole or a partial balance of a card to another credit card is called Balance Transfer Cash Advance Finance Charge

Balance Transfer

The days between the last statement and the current statement cycles is called Billing Cycle Grace Period Balance Transfer Period

Billing Cycle

Lenders consider debt-to-income ratio. Capital Capacity Character

Capacity

Asking if you have a savings account is an example of: Character Capital Collateral Capacity

Capital

Lenders consider your net worth. Capital Capacity Collateral

Capital

Refers to a person's assets Refers to a person's assets Capacity Capital

Capital

Allowing the courts to arrange a repayment schedule to pay creditors occurs under which of the following filings? Chapter 7 Chapter 11 Chapter 13 Chapter 15

Chapter 13

Lenders consider what is pledged for repayment of loan. Capital Capacity Collateral

Collateral

The Fair Debt Collection Practices Act applies to which of the following: Banks Collection agencies Credit unions Finance companies

Collection agencies

Lenders consider what's happening in the local economy. Capital Capacity Conditions

Conditions

When you receive goods and services now, and pay for them later, you're using: A lease Opportunity costs Credit

Credit

Which is not one of the Five Cs of credit? Capacity Credit rating Conditions

Credit rating

A low interest rate that is offered for a limited time as an incentive is a(n) Low ball rate Introductory rate Minimum balance rate

Introductory rate

What right or responsibility is included in the Fair Debt Collection Practices Act? Debt collectors cannot use unfair or deceiving practices to collect overdue money on a loan that a creditor has forwarded to them. You cannot be denied credit based on your race, sex, marital status, religion, national origin, age, or because you are on public assistance.

Debt collectors cannot use unfair or deceiving practices to collect overdue money on a loan that a creditor has forwarded to them.

The average daily balance is equal to the sum of daily balances: Plus number of days in billing cycle Less number of days in billing cycle Divided by number of days in billing cycle Multiplied by number of days in billing cycle

Divided by number of days in billing cycle

Which act prohibits discrimination? Equal Credit Opportunity Act Fair Credit Billing Act Fair Credit Reporting Act Fair Discrimination Policy Act

Equal Credit Opportunity Act

How do lenders find your credit history? From bank records From employer records From credit bureaus

From credit bureaus

Time allowed to pay your balance without being charged a finance charge is the Billing Cycle Grace Period Finance charge calculation period

Grace Period

College loan Single payment credit Installment credit Revolving credit

Installment credit

The smallest amount of the balance a cardholder is required to pay is called the Balance Grace Period Minimum Payment

Minimum Payment

Monthly telephone bill Single payment credit Installment credit Revolving credit

Single payment credit

What is the most commonly used credit score? The FICO score Acme credit score Vantage Score

The FICO score

Which of these is in a credit report? Your educational history The amount of tax withheld from your paycheck The names of everyone who has requested your credit history in the past six months

The names of everyone who has requested your credit history in the past six months

To protect yourself from falling into debt, you should save enough money to last you through Two weeks One month Three to six months One to two years

Three to six months

The three national credit bureaus (credit-reporting agencies) are: TransUnion, Enterprise and Capital One TransUnion, Equifax and Experian TransUnion, Moody's and Experian

TransUnion, Equifax and Experian

A car loan is an example of a secured loan. True False

True

A disadvantage of using credit is impulse buying. True False

True

APR measures the interest rate charged by a credit card True False

True

Amortization is a payment process, True False

True

Credit is granted to those who have demonstrated their ability to manage their money over time. True False

True

Credit used for an investment, such as a house, is good credit. True False

True

Finance charges are levied on consumers who carry balances from month to month. True False

True

I need to check my credit report at least once a year. True False

True

I need to pay my bills on time to maintain a good credit history. True False

True

In determining character, the lender may ask how long you have lived at your present address. True False

True

It is my responsibility to make sure that my credit report is correct and up to date. True False

True

Most credit cards have a credit limit. True False

True

The daily balance is the previous balance plus cash advances plus purchases less any payments. True False

True

The interest rate, or fee for paying off credit card debt in monthly installments, can be as high as 30 percent. True False

True

The monthly payment is calculated by totaling the finance charge and amount financed divided by the number of payments of the loan. True False

True

Unpaid tax liens remain on your credit report for 15 years. True False

True

Using the 20-10 rule, a person earning $40,000 net income a year (excluding mortgage or rent) should have no more than $8,000 in outstanding debt. True False

True

Your credit report indicates if any accounts are in collection status. True False

True

You borrow $20,000 from First State Bank to buy a car. This transaction is subject to the Credit Card Act Fair Credit Reporting Act Car Equity Act Truth-in-Lending Act

Truth-in-Lending Act

Are missed payments a factor used to calculate a credit score? Yes No

Yes

Is carrying a high balance on a credit card a factor used to calculate a credit score? Yes No

Yes

Is personal bankruptcy a factor used to calculate a credit score? Yes No

Yes

What is your liability if you have lost your credit card? You must pay for all charges until you find the credit card. You are liable for the first $50 of charges if your card is used. You are liable for all charges until you report the card lost.

You are liable for the first $50 of charges if your card is used.

What right or responsibility is included in the Equal Credit Opportunity Act? You cannot be denied credit based on your race, sex, marital status, religion, national origin, age, or because you are on public assistance. A creditor must give you written notice of the cost of credit and terms of repayment before you get a loan or credit card.

You cannot be denied credit based on your race, sex, marital status, religion, national origin, age, or because you are on public assistance.

What right or responsibility is included in the Fair Credit Reporting Act? Debt collectors cannot use unfair or deceiving practices to collect overdue money on a loan that a creditor has forwarded to them. You have the right to find out information on your credit report.

You have the right to find out information on your credit report.

Which of the following is NOT considered when calculating your credit score? Your payment history The types of credit you are using Your income

Your income

A credit score is: a three-digit number summarizing the state of your credit an alphabetical score grading your creditworthiness a numerical score reporting how much money you owe

a three-digit number summarizing the state of your credit

The category that considers your current income level and current borrowing level is capital capacity character

capacity

The Fair Debt Collection Practices Act makes it illegal for banks and businesses to discriminate against potential creditors debt collectors to impersonate government officials you to seek the services of a credit repair organization you to be denied credit

debt collectors to impersonate government officials

Inquiries from lenders to the credit bureau will: raise your score lower your score not affect your score

lower your score

Collateral is used to "secure" a loan something of value you can deduct from your taxes not part of the "Five Cs" used to determine creditworthiness

used to "secure" a loan

The biggest factor in your credit score is: whether you pay your bills on time how much debt you have how long you've had credit

whether you pay your bills on time

A credit score helps a lender determine: how much money you owe how much money you make whether you're a good financial risk

whether you're a good financial risk