Ch. 5 Skills Check

Select all that apply Positive implications of the use of credit include: A. default B. improved credit score C. increased creditworthiness D. loss of creditworthiness E. bankruptcy

B, C

The _____ handles complaints regarding credit cards online.

CFPB

Which of the following is true? Cosigning a loan is never risky. The creditor must try to collect from the borrower before collecting from a cosigner Your credit is not impacted if you cosign a loan, the borrower defaults, and the debt is not repaid. Creditors can use same collection methods with cosigner as could be used with the borrower.

Creditors can use same collection methods with cosigner as could be used with the borrower.

True or False Question 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 not an advantage of using credit? Misuse of credit can lead to long-term financial problems Credit cards are a substitute for cash Credit cards allow you to make purchases online Credit cards usually have a grace period

Misuse of credit can lead to long-term financial problems

With _____-end credit, you pay back one-time loans in a specified period of time and in payments of equal amounts. With ______-end credit, you pay loans back on a continuous basis and you are billed periodically for partial payments.

close; open

In which of the following are many but not all debts forgiven? Partial debt recovery Lending leniency reporting Straight bankruptcy Incomplete bankruptcy

straight bankruptcy

Consumer credit through installment payments became popular in the early part of the 20th century due to:

the popularity of the automobile

______ is an arrangement to receive cash, goods, or services now and pay for them in the future.

credit

If you cannot make a payment on a debt when due, contact the _____ at once to work out a modified payment plan.

creditor

The five Cs refer to: policies that help determine who will receive credit a way bankers can legally deny good potential customers uniform policies that all creditors use in the same way

policies that help determine who will receive credit

A line of credit is a _____-term loan that is approved before you actually need the money.

short

Select all that apply A billing error is: A. goods or services purchased without your authorization B. when the business mails your statement to an incorrect home address C. a mathematical error D. showing your credit score on your statement E. being forced to pay for defective goods

A, B, C, E

Select all that apply Which of the following is a prearranged loan for a specified amount of money that is accessed with special checks? A. A bank line of credit B. A check access account C. A revolving check credit D. A revolution of credit

A, C

Under the Consumer Credit Reporting Reform Act, what would happen if a Credit Bureau verifies inaccurate information?

If the Credit Bureau is wrong about information, the consumer can sue for actual, possibly punitive damages.

Why should you care how to use credit? -Credit is designed to be available for all consumers and, thus, will be available to all that need to use it. -If you misuse credit, you will pay for it with future income and it could take many years to pay off the debt. -You don't have to worry about misusing credit because you can always pay it off with your income and increase your credit limit.

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

What is an irresponsible use of credit? Paying for your expenses and working hard. Purchasing goods until your credit limit is reached. Having $30,000 in debt and working full-time. Flying to another city for a job interview.

Purchasing goods until your credit limit is reached.

What type of applications does the ECOA cover? The ECOA covers applications for mortgages and home improvement loans. The ECOA participates with the Secret Service to fight identity theft. The ECOA covers the creditors who appraise the value of property.

The ECOA covers applications for mortgages and home improvement loans.

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

True

A bank line of credit is also known as: a debit card an open-end credit a cashier's check a revolving check credit

a revolving check credit

What demographic originally used credit? Politicians Affluent individuals Everyone

affluent individuals

True or false: Subtract monthly expenses from income. If the difference is the less than the loan payment, you can afford the loan.

False

Where does the Consumer Credit Reporting Act place the burden of proof for accurate credit information? It does not regulate the burden of proof, but states that all reporting of credit must be within 90 days of credit transactions. It does not regulate the burden of proof, but provides restrictions for the format of credit card statements. It places the burden on credit reporting agencies. It places the burden on the consumer.

It places the burden on credit reporting agencies.

A loan for a motorcycle is an example of: open-end credit closed-end credit vehicle credit

closed-end credit

Which of the following statements is not true? If your denial for credit is based on a credit report, you can see your file for a fee. If you are denied credit based on a credit report, you are entitled to know the specific information that led to the denial. You are entitled to ask a credit bureau to correct its records if a mistake took place that led to you being denied credit. If you are denied credit, you are entitled to know why.

If your denial for credit is based on a credit report, you can see your file for a fee.

Which of the following is not a disadvantage of using credit? Credit does not increase total purchasing power Failure to repay a secured loan could result in loss of the property Using credit costs money Responsible use of credit can lead to stability

Responsible use of credit can lead to stability

What is a credit bureau? A reporting agency that tracks your dining preferences A reporting agency that collects information on how promptly people and businesses pay their bills A reporting agency that collects information to provide to future employers only A reporting agency that tells consumers the exact method to increase their credit score

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

Select all that apply Which of the following is something that the Equal Credit Opportunity Act is designed to do? A. Ensure that persons are not discriminated against based upon their age B. Show bankers how to ignore retirement income when evaluating loans C. Ensure that persons are not discriminated against because of their sex D. Ensure that persons are not discriminated against because of their race E. Offer credit to consumers through the ECOA bank

A, C, D

If you ______ a loan and the borrower does not pay the debt, you may have to pay up to the full amount of the debt as well as any late fees.

cosign

What is the trade-off for using credit? Current income Increase in credit limit Decrease in future available income Purchasing power benefit

Decrease in future available income

True or false: Family loans are always simple arrangements and can benefit both parties with little or no documentation.

False

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

close; open

True or false: The trade-off of using credit is it decreases the availability of money to spend in the future.

true

True or false: The FCBA is a major reason that consumers should buy high dollar items with a credit card rather than a debit card.

True