Personal Finance Exam 3 (7-9)
you are presented 2 choices to borrow funds for a significant unexpected expenditure. it will take at least 3 years to pay off the loan assuming you make more than the minimum payment. which choice is the least cost alternative in terms of interest paid over the life of the loan?
a credit card with a variable interest rate of 4% over the prime rate; for info, the latest forecast is for prime to stay below 5% throughout the life of your loan
for good financial management, you should treat a credit card as...
a means of convenience
the _____ the credit history, the _____ the credit unit
better; higher
a commitment by an insurance company to cover credit repayments under adverse conditions such as accident or illness is called...
credit insurance
going through documents discarded by your bank to obtain info in order to access your bank account is an example of...
dumpster diving
what is NOT a method by which financial institutions calculate finance charges on credit cards?
ending balance method
which of the following federal agencies should always be notified in the even of identity theft?
federal trade commission
all of the following cash needs are appropriately sourced from a home equity loan versus credit card or short term personal loan, except for...
going to disneyworld with your family
credit scores in the 500-600 range will most likely result in ...
higher interest rates
the more expensive the car, the _____ the payments, and the _____ you can put toward other investments.
higher; less
the ability to save funds is _____ when credit payments are _____.
increased; small reduced; large
over the life of a loan, the payment to principal _____ and the portion to interest expense _____.
increases; decreases
a type of credit that has a fixed number of payments is...
installment credit
when making payments on a credit card, the amount paid is first applied to _____ and the remainder is applied to _____.
interest for the month; balance due
which of the following is a true statement about student loans?
interest payments on some loans are deferred until the students graduate and enter the work force
the minimum credit score required by financial institutions
it varies by institution
the loan contract identifies all of the following except...
loan offer
if you are considering trading in a used car when you purchase your new one, it is best to...
make the trade- in deal a separate transaction from the new car deal
which of the following is NOT a disadvantage of using credit?
makes it easier to save
what is NOT a factor in the FICO credit scoring?
marital status
on your credit card statement, the amount that you owe the financial institution now is called...
new balance
credit issued to consumers for very short periods of time to make specific purchases
non-installment credit
credit that has a fixed balance that is to be paid in full each month
open accounts credit
when using your credit card frequently, it is wise to...
pay off the balance every month
what is the most common source of financing for personal loans?
peer-to-peer lending
manipulating email viruses and host files to redirect users from legitimate commercial websites to bogus websites to obtain login names and passwords is refer to as...
pharming
sending emails purporting to be from reputable companies in order to induce personal information
phishing
what is NOT a method for computing interest on credit cards?
present value of future payment method
obtain personal information under false pretenses
pretexting
utilities extend credit by...
providing a service and billing at the end of the period
which is true regarding resale value of cars?
resale values can be determined from the internet and other sources and should be a consideration in buying a car
what are the 3 types of credit?
revolving installment open account
credit that is automatically renewed as debts are paid off
revolving credit
what is the least common mattering which an identity theft victim discovers the crime?
routine examination of a credit report
a credit card issued by a financial instituted and secured by funds deposited by the cardholder is a ...
secured card
if a person obtains your credit card number by standing close enough to you to either see your card or hear you speak the number during a phone call, they are...
shoulder surfing
the personal loan process with a financial institution requires all of the following except...
sitting through an interview
what is a disadvantage of using credit?
slowing of progress towards financial goals
the Truth-in-Lending Act requires which of the following?
specifying loan rate standardization
what is NOT an interest rate calculation method discussed in the text?
sum of the digits interest
what is NOT an interest rate calculation method?
sum of the digits interest
what is NOT true about annual fees on credit cards?
the fees are the same on all credit cards
what is NOT true regarding a cosigner on an account?
the lender may not seize the assets of the cosigner
credit cards have all of the following advantages except...
they allow you to borrow cash interest free for 60 days
a credit card whose interest rate changes as a specific market interest rate changes is said to have a ...
variable rate
consideration in selecting a car should include all of the following except...
what kind of car you really want, regardless of what you need
free credit reports are accessible to all U.S. consumers at...
www.annualcreditreport.com
when deciding whether to trade in a car or sell it privately, which of the following is not a consideration?
year, make, and model of the car
the advantage to financing a car for a long period of time (of up to 7 years) is...
your monthly payment will be lower
what are the 3 major credit bureaus?
Equifax Experian Trans Union
credit scoring based on payment history and levels of debt
FICO
the identity theft and assumption deterrence act has designated which federal agency as the central clearinghouse for all identity theft complaints?
FTC
examples of personal loans
-commercial banks -credit unions -finance companies
in comparing credit cards to other forms of credit, what is TRUE?
-credit cards are generally the most expensive form of credit -a home equity loan is a way of combining credit card and other debt -you should pay the most expensive debt off first
in comparing credit cards to other forms of credit, what is FALSE?
-credit cards can be viewed as a source of funds -you should invest funds before paying off your credit card -it is prudent to borrow from some cards to pay off other credit cards
how can you improve your credit score?
-reduce debt loan -making the minimum payments -becoming current with payments
how is VantageScore different from a FICO score?
-vantagescore uses similar factor to determine credit worthiness but the weightings may be different -FICO and VantageScore generate generally similar ratings
what are the 6 major areas of information that may be included in your credit report?
1) name, report number, date 2) identifying information 3) potentially negative information from public records 4) unpaid accounts turned over to a collection agency 5) all open and closed accounts 6) inquiries section
how long does negative credit information stay on record?
7 years
what may NOT be a feature of some credit cards?
annual fees
what is NOT a step you should take to try to improve your credit score?
applying for more credit cards
a weak credit report can affect you because...
assets are reviewed to serve as collateral for the loan
what information would NOT be asked on a credit card application?
country of birth
credit cards with tiered interest rates charge cardholders who...
carry large balances at higher rates