Deck 6: Building and Maintaining Good Credit

Question 1

Loans generally require equal payments over a set period of time.

Answer 1

True

Question 2

Convenience use of a credit card is justified only if the card balance is paid in full by the end of the year.

Answer 2

False

Question 3

Credit is a term used to describe any situation in which goods,services,or money is received in exchange for a promise to repay at a future date.

Answer 3

True

Question 4

Convenience use of credit is common.

Question 5

Credit cards allow repeated use of credit as long as equal monthly payments are maintained over a set period of time.

Question 6

Credit use increases future buying power.

Question 7

The APR expresses the cost of credit on a monthly basis as a percentage rate.

Question 8

Interest is the charge for the privilege of borrowing money.

Question 9

The most commonly used forms of credit by consumers are loans and credit cards.

Question 10

Credit cannot be used to own expensive products sooner.

Question 11

The Truth in Lending Act requires lenders to state the finance charge both in dollars and as an annual percentage rate (APR).

Question 12

Advantages of credit use include increased protection against rip-offs and frauds.

Question 13

The lower the annual percentage rate of interest (APR),the higher the cost of credit.

Question 14

A principal problem with using credit is the opportunity cost of being less able to save and invest.

Question 15

The APR can be used to compare credit contracts with different time periods,finance charges,repayment schedules,and amounts borrowed.

Question 16

Taking on excessive debts early in life may compromise your goal of being financially successful.

Question 17

Credit card blocking is the process whereby the merchant may notify the credit card issuer to put a hold on your account for the anticipated total amount of the charge.

Question 18

People can use credit to take advantage of "free" credit.

Question 19

When comparing loans from two or more sources you want to focus on the lowest monthly payment.

Question 20

Credit cards allow repeated use of credit as long as you make the minimum monthly payment.

Question 21

If your total debts exceed 33 percent of your net worth (equity) you are seriously overindebted.

Question 22

A consumer that has nonmortgage debt repayments of 10 percent or more of annual take-home pay is seriously in debt.

Question 23

A debt-to-equity method provides a quick idea of one's financial solvency.The larger the ratio,the riskier the likelihood of repayment.A ratio in excess of 0.25 is considered high.

Question 24

It is a smart move to consolidate all your student loans into one loan once you graduate from college.

Question 25

The debt-to-income method of determining your debt limit compares nonmortgage debts to take-home pay.

Question 26

Your debt limit is the overall maximum you believe you should owe based on your ability to meet the repayment obligations.

Question 27

According to a recent study,approximately 5 percent of those applying for credit are turned down.

Question 28

The finance charge on a loan is simply the interest charged by the lender.

Question 29

A credit applicant is required by federal regulations to disclose all of his or her sources of income.

Question 30

If you are unable to get completely out of debt every five years (except for a mortgage loan),you probably lean on debt too heavily.

Question 31

The willingness of a lender to grant you credit is a good indicator that you can afford the payments required.

Question 32

Lenders pay a fee for each credit report requested.

Question 33

A debt-to-equity method provides a quick idea of one's financial solvency.The larger the ratio,the riskier the likelihood of repayment.

Question 34

The additional dollar cost for using credit is referred to as the APR.

Question 35

Under the continuous-debt method of determining whether you are carrying too much debt you should be able to get out of all debt except mortgage debt completely within four years.

Question 36

Lenders are not allowed to discriminate among applicants.

Question 37

Credit scores can dictate whether you will be granted credit and at what interest rates.

Question 38

The Equal Credit Opportunity Act prohibits the rejection of credit due to a poor credit history.

Question 39

Dual-earner households should consider lower debt limits as a percentage of income.

Question 40

The value of an asset less the amount owed on a debt used to buy the asset is your stake in the asset.

Question 41

It is illegal for a creditor to charge different interest rates to different borrowers.

Question 42

Misusing credit and not paying bills on time can damage employment prospects.

Question 43

Many offers for credit monitoring services are actually negative option plans that automatically sign you up for a credit reporting service.

Question 44

Identity theft is the most commonly perpetrated form of consumer fraud in the U.S.

Question 45

Closing credit card accounts will increase your credit score.

Question 46

If your credit card is lost or stolen or if you ever suspect fraudulent use of an account,you should contact each of the three national credit bureaus and have a "high-risk account holder" designation put on your file.

Question 47

Having both a checking and a savings account can help one get credit and at lower rates.

Question 48

The higher your credit score the more you will pay for credit.

Question 49

You can instruct a credit bureau to not release your credit report to anyone without your permission by requesting a credit card block.

Question 50

Signing up for a "free" credit monitoring service where you are automatically renewed on a fee basis unless you cancel at the end of the free period is an example of a negative option plan.

Question 51

You should review your credit bureau reports at least once every three years.

Question 52

Closing unused credit card accounts that have been open for a long time will likely not improve your credit score.

Question 53

Experian,Equifax,and TransUnion are the three largest national groups of credit bureaus.

Question 54

Under a tiered pricing system,creditors charge lower interest rates to lower-risk borrowers.

Question 55

The credit scores needed for credit approval vary from lender to lender.

Question 56

The information about you contained in credit bureau files is one of the most important aspects of your financial life.

Question 57

Credit scoring systems tend to ignore the degree to which you owe a high percentage of the available credit limits on your credit cards.

Question 58

The actual decision to grant credit is made by a credit bureau.

Question 59

Although your credit file at each of the three major credit bureaus may differ,your credit scores will be the same.

Question 60

The three digit code on the back of a credit card that helps protect against unauthorized use of the card is called its card verification value

Question 61

Collection agencies may telephone a debtor's employer to obtain financial information.

Question 62

The Fair Credit Reporting Act requires that reports contain accurate,relevant,and recent information,and that only bona fide users be permitted to review a file for approved purposes

Question 63

A discharged debtor cannot use Chapter 7 of the Bankruptcy Act again for at least six years.

Question 64

Repossession is a legal proceeding by which the lender seizes an asset for nonpayment of a loan.

Question 65

The only truly free way to obtain your credit reports is through annualcreditreport.com.

Question 66

A debt management plan is an arrangement whereby the consumer makes monthly payments that are distributed to each creditor.

Question 67

Chapter 7 of the Bankruptcy Act is permitted when it would be highly unlikely that substantial repayment could ever be made.

Question 68

Divorce could affect the creditworthiness of both partners.

Question 69

Bankruptcy remains on one's credit record for seven years.

Question 70

Which of the following can be obtained using credit?

A)Goods
B)Services
C)Money
D)All of these

Question 71

Consumer credit can take the form of an installment loan that is repaid in ____ payments over a ____ period of time.

A)variable; variable
B)equal; set
C)increasing; set
D)decreasing; variable

Question 72

Credit counseling agencies can provide individuals with credit counseling as well as assistance with financial problems.

Question 73

Chapter 13 of the Bankruptcy Act provides for an immediate liquidation of assets.

Question 74

When debts were accumulated in both names,divorce decrees have a legal effect on who technically owes which debts.

Question 75

It is possible to still owe money after an item of collateral is repossessed for nonpayment on the debt.

Question 76

If information in your credit report is proved to be erroneous,it must be corrected by the credit bureau.

Question 77

If the credit bureau refuses to make a correction to an error in your file,you may wish to provide your version of the disputed information by adding a consumer statement to your credit bureau file.

Question 78

Negative credit information of all types can be kept on your credit bureau file for up to five years.

Question 79

You should change the marital status linked to your credit card account should you become married,separated,or divorced.

Question 80

Bankruptcy is a constitutionally guaranteed right that permits people (and businesses) to ask a court to find them officially unable to meet their debts.