Deck 2: Managing Your Financial Resources - Assessing,Managing and Securing Your Credit

Question 1

Someone with a credit score of 800 will pay a higher interest rate than someone with a score of 820.

Answer 1

False

Question 2

The most important element affecting your credit score is your debt level.

Answer 2

False

Question 3

If you have a poor credit score,there may be lenders willing to loan you money but at a higher interest rate.

Answer 3

True

Question 4

Using your credit card provides you free financing each month.

Question 5

When you use credit to purchase a second product at half price (e.g.a "buy one get another for 50% sale"),you save money.

Question 6

If your only credit is a credit card with a $15 000 limit which you've had for ten years,and you keep your balance below $2000 and always pay at least the minimum due,you will have a good credit rating.

Question 7

Credit insurance will pay off all your credit card debt when you cannot work due to accident or illness.

Question 8

Revolving open-end credit typically does not specify a maximum amount that can be borrowed.

Question 9

Your credit report indicates your spouse's personal information.

Question 10

In evaluating a borrower's creditworthiness,income and expenses are carefully reviewed,but assets are not relevant.

Question 11

Credit issued by deChapterment stores for relatively long periods of time is called non-installment credit.

Question 12

Identity theft is only conducted by individuals who do not have legitimate access to your information.

Question 13

The credit bureaus will have approximately the same score for each individual in their records.

Question 14

Posing as an employee of a financial institution to obtain information for purposes of identity theft is an example of pretexting.

Question 15

Despite a high credit score,your income level may be the determining factor in whether you can get a loan.

Question 16

A BEACON score of 820 indicates a person has a high likelihood of paying back debt as expected.

Question 17

Acquiring and using a credit card is an excellent way to start building your credit history.

Question 18

If you are a victim of identity theft,you may be turned down for employment as a result of incorrect background information.

Question 19

The credit scoring model used in Canada is referred to as the Fair Isaac Corporation (FICO).

Question 20

If you declare bankruptcy within seven years of ceasing to be a student,you may have your student loans forgiven.

Question 21

Which of the following is not an element of a credit report?

A)Your account history
B)Bank information
C)Marital status
D)A list of creditor contracts

Question 22

If Brian has a home worth $400 000 and a mortgage of $200 000,he should be able to get a HELOC for $160 000 at a better interest rate than if he got an unsecured line of credit.

Question 23

Which of the following is a typical example of an instalment loan?

A)A credit card
B)A student loan
C)A line of credit
D)A demand loan

Question 24

Credit card use can be good for your financial plan if you have budgeted to pay the entire balance when the statement is due.

Question 25

Which of the following is an advantage of using credit?

A)It increases the need to cover cash flow shortages.
B)It increases the number of cheques written.
C)It does not affect your cash flow statement.
D)It reduces the need to carry cash.

Question 26

If not objected to by the creditors,a consumer proposal could enable someone with $50 000 in consumer debt to pay off $30 000 of it and have it removed from their credit bureau report.

Question 27

The greatest benefit of student loans is that the interest is tax deductible.

Question 28

One of the greatest benefits of leasing a car is that you do not have the hassles of ownership.

Question 29

The risk in co-signing on a loan for a friend is not significant,as you are not the primary borrower.

Question 30

If a buyer has limited capital,leasing a car will usually require lower monthly payments than a car loan.

Question 31

Which of the following will not be included on your credit report?

A)Your personal information
B)Your employment income
C)Unpaid accounts
D)Companies that have recently inquired about your credit report

Question 32

The worst outcome from identity theft is that you could be responsible for charges someone made fraudulently on your credit card.

Question 33

If you were charged the maximum legal rate of interest on a $1000 loan for one year,the interest cost would be $60.

Question 34

A 20 percent annual interest rate on a $10 000 loan amortized over five-years would result in interest charges of $10 000.

Question 35

The item that receives the most weight in the BEACON credit scoring system is

A)the amount of credit used each month.
B)credit payment history.
C)credit use.
D)the total amount of credit.

Question 36

The proceeds from a home equity loan must be used for home improvements.

Question 37

Which of the following will have a negative effect on a credit history?

A)Taking out a car loan with a ten year maturity
B)Making as many purchases as possible with cash
C)Never exceeding your credit limit on your credit card
D)All these options would have a positive effect on credit history.

Question 38

Using the previous balance method,if you paid your credit card off five days late and your balance was $5000,with interest 20% calculated daily,you would owe $15.16 in interest.

Question 39

In considering the true cost of a personal loan,if you used collateral to reduce the interest charge,then the appraisal fee charged to evaluate the assets should not be considered Chapter of the cost of borrowing.

Question 40

Someone with a poor credit rating might be offered a credit card with a 28 percent interest rate while someone with a high credit rating may be offered 21 percent.

Question 41

If you receive a phone call that seeks to verify or update personal information,you should

A)ask several questions of the solicitor to verify his or her authenticity.
B)ask to speak to a supervisor.
C)obtain his or her name and address in case you need to contact him or her in the future.
D)never give out any personal information to someone you do not know.

Question 42

Errors on credit reports can occur.If there is an error on your report

A)it is your responsibility to review it once a year for accuracy and inform of any errors.
B)it can result in the credit agency being charged under the Fair Credit Reporting Act.
C)the creditor reporting to the agency must correct it solely at your request.
D)you must inform the Better Business Bureau to take your case to the authorities.

Question 43

When do you need to use a credit repair service?

A)When you find an error on your credit report which is negatively affecting your score
B)At the point that you need to work with the trustee in bankruptcy to develop a consumer proposal
C)A credit repair company should be contacted only as a last resort to avoid bankruptcy.
D)Never,as they have no special powers to correct information on your credit report.

Question 44

Low credit scores may result in

A)lower interest rates for borrowing.
B)higher interest rates for borrowing.
C)automatic acceptance of your credit application.
D)targeting by credit companies.

Question 45

Revolving credit means

A)the loan balance will fluctuate based on the amount used.
B)the interest rate will revolve above the prime rate.
C)it is a credit card.
D)it is a mortgage.

Question 46

A poor credit history will appear on your credit report for

A)3 to 5 years.
B)3 to 10 years.
C)5 to 7 years.
D)7 to 10 years.

Question 47

If a person obtains your credit card number by standing close enough to you to either see your credit card or hear you speak the number during a telephone call,he or she is

A)shoulder surfing.
B)pharming.
C)pretexting.
D)skimming.

Question 48

Which of the following statements is true regarding a review of your credit agency report?

A)You will not have authority to make corrections,as the information must come from a financial institution.
B)It will help determine if there are credit cards you should apply for to improve your credit standing.
C)It will reveal if you have sufficient income to carry additional debt.
D)It will reveal deficiencies that you can work on to improve your credit rating.

Question 49

Manipulating email viruses and host files to redirect users from legitimate commercial websites to bogus websites to obtain log-in names and passwords is referred to as

A)pharming.
B)phishing.
C)skimming.
D)trolling.

Question 50

Which of the following can be used by a creditor in deciding whether or not to grant credit?

A)Credit history
B)Marital status
C)Gender
D)Any of the above

Question 51

Identity thieves that obtain your information from the magnetic strip on your credit card are using a technique known as

A)pharming.
B)phishing.
C)pretexting.
D)skimming.

Question 52

Even though you may have a very high credit score,the loan approval

A)relies on a lower BEACON score.
B)relies on consistent scores from all credit reporting agencies.
C)relies on the lender's assessment of sufficient income.
D)relies on the impression you make with your lender.

Question 53

Credit insurance

A)is a free benefit on most credit cards.
B)can be used to pay off all debt when a creditor becomes unemployed.
C)is a good substitute for health and disability insurance.
D)can cover monthly credit repayments if a consumer cannot work.

Question 54

The best policy regarding credit is

A)always go for the highest credit limit possible.
B)always make the minimum payment.
C)pay back debt using consistent payments every month.
D)take steps to increase your credit score.

Question 55

Which of the following is true about credit bureaus in Canada?

A)There are two federally appointed credit bureaus in Canada.
B)It is impossible to have a better credit score at one bureau than another.
C)Lenders may access your credit information without your permission.
D)Lenders may use more than one credit bureau for information.

Question 56

A large number of recent credit inquiries suggests

A)you have a high BEACON score.
B)you are having trouble getting credit.
C)you have a good rating with many financial institutions.
D)you are very diligent in tracking your credit information.

Question 57

Using email messages from a supposedly legitimate source to obtain account information for the purpose of identity theft is referred to as

A)pharming.
B)phishing.
C)skimming.
D)trolling.

Question 58

Posing as an employee of a brokerage firm to obtain information to allegedly update your account information is an example of

A)phishing.
B)pharming.
C)pretexting.
D)skimming.

Question 59

A credit bureau report may include

A)your account history.
B)your spouse's name.
C)a list of debtor contacts.
D)all of the above.

Question 60

Which of the following is the most serious threat from identity theft?

A)Criminal activities attributed to the victim
B)The financial cost to society
C)Loss of access to credit
D)Credit card charges made by the perpetrator

Question 61

In making the purchase versus lease decision,it is important to remember that

A)dealers may impose additional charges for leasing.
B)leasing is less risky because you do not have equity.
C)leasing is less expensive overall than purchasing.
D)you won't be required to pay maintenance costs on the leased car.

Question 62

A proposal to creditors is made by an insolvent debtor having difficulty meeting payments.Which of the following is true?

A)The proposal must be rejected by creditors within 45 days,or it will be deemed to be accepted.
B)The history will remain on the credit bureau report for three years after terms have been met.
C)The proposal must be for an amount over $50 000.
D)The proposal must require at least fifty percent of the total debt to be repaid.

Question 63

Jacob needs to borrow $19 000 to purchase a car.If the interest rate is seven percent compounded monthly,which of the following is true when considering a five,seven or ten year term?

A)If he selects a seven year term he will save interest by keeping his payments to $286.76 per month.
B)If he selects a ten year term he will save $2385.28 in interest compared with the seven year term.
C)If he selects a five year term he will save $1514.55 in interest compared with the seven year term.
D)The overall interest will be the same,regardless of the term.

Question 64

Which of the following is most accurate about interest rates in Canada?

A)Charging a rate of three percent for a seven day payday loan is legal in Canada.
B)As long as loan charges come in the form of fees,they are not included in interest rate calculations in Canada.
C)Payday loan companies provide a necessary service and have permission to charge above the maximum loan rate in Canada.
D)The maximum interest rate that can be legally charged on a consumer loan in Canada is 60 percent.

Question 65

Harry purchased his condo for $330 000 and now the appraised value is $360000.His outstanding mortgage is $228 000.What is the maximum home equity line of credit Harry would qualify for?

A)$36 000
B)$60 000
C)$72 000
D)$105,600

Question 66

Which of the following is a true statement about student loans?

A)The Federal Government is responsible for all student loans.
B)Loan limits are higher for students who are dependants.
C)The repayment schedule is deferred.
D)Students who declare bankruptcy within seven years of graduation may have their loans forgiven.

Question 67

Your credit card had balances of $800 for 13 days,$600 for 5 days,and $650 for 12 days.Assume an annual interest rate of 18 percent,30-day billing cycle and 20-day grace period.How much is the interest charge using the average daily balance method,if the credit card gets paid off five days after the statement due date?

A)$1.74
B)$8.71
C)$12.20
D)$19.17

Question 68

The term amortized refers to

A)the method by which interest is calculated in a loan contract.
B)the repayment of a loan through a series of equal payments.
C)the loan maturity date in a loan contract.
D)the term contracted to pay off a loan.

Question 69

If a credit card company has a 30-day billing period,20-day grace period and an interest rate of 20 percent,how much interest will be charged on a $5000 average monthly balance which gets paid 40 days after the due date using the average daily balance method?

A)$258.90
B)$115.07
C)$201.37
D)$172.60

Question 70

TransUnion is aware that you are one month late on your car payment,while Equifax has not yet uncovered this information.Which of the following statements is correct?

A)TransUnion will have a lower credit score for you than Equifax.
B)Both companies will have the same credit score because of the grace period.
C)Being late one month on a car payment will not affect your BEACON score.
D)Both companies will have the same credit score because car payments are backed by collateral.

Question 71

Making extra payments on a loan

A)reduces the total interest paid.
B)frees up cash flow for other expenses.
C)lengthens the maturity of the loan.
D)reduces the size of future payments.

Question 72

Collateral

A)gives the lender additional recourse if the payments are not made.
B)is used on unsecured loans.
C)increases the interest rate on loans.
D)is required on all loans except revolving credit.

Question 73

A credit card charges 18 percent annual interest and Frank has $750 due on the statement date.He is only able to make the minimum payment of $22.50.If the billing cycle is 30 days and the grace period is 20 days,and he pays the full balance at the next due date,how much interest would he owe?

A)$10.76
B)$17.94
C)$28.70
D)$21.53

Question 74

From a borrower's perspective,all else the same,a longer-term loan

A)costs more in interest.
B)increases the size of monthly payments.
C)decreases the size of monthly payments so costs less in interest.
D)is most cost effective in the long run.

Question 75

A person can be declared insolvent if

A)he or she has more debts than assets.
B)his or her spouse is insolvent as well.
C)he or she owes $1000 and is unable to pay.
D)his or her monthly payments exceed $1000.

Question 76

The loan contract identifies all but which of the following?

A)Credit score
B)Amount of the loan
C)Interest rate
D)Loan repayment schedule

Question 77

What would be the real cost of borrowing in the following case? A home equity loan is advertised at three percent compounded monthly,however,there is a legal fee of $400 and appraisal fee of $450 to set up the house as collateral.If Sarah needs to borrow $20 000 for one year,at which time will be able to repay the full amount,what is the effective rate of borrowing the $20 000 for the year?

A)3)04%
B)7)29%
C)7)25%
D)4)25%

Question 78

Which of the following is most accurate about second mortgages?

A)Most people have two mortgages on their homes.
B)The primary mortgage is for the down payment and the secondary mortgage is the main mortgage.
C)A home equity loan is commonly a second mortgage.
D)Second mortgages are last resort financing.

Question 79

Fred has a credit card which uses the average daily balance method,has a 30-day billing period,a 21-day grace period and charges 21 percent annual interest calculated (but not compounded)daily.His average daily balance for the billing period was $7900,and he could not pay it off until received his pay cheque eight days after the statement due date.How much interest does he owe?

A)$268.17
B)$172.72
C)$136.36
D)$36.36

Question 80

The advantage of leasing over purchasing a vehicle is

A)no deposit is required.
B)lower monthly payments than for borrowing.
C)there is less hassle than when purchasing a vehicle.
D)there are no maintenance expenses.