Deck 7: Assessing and Securing Your Credit

Question 1

All of the following are correct statements about credit except

A)creditor provides funds.
B)credit needs to be paid back in the future.
C)repayment will include interest.
D)the interest is the total amount to be repaid.

Answer 1

the interest is the total amount to be repaid.

Question 2

It is always easier to pay back what you borrow than to obtain credit in the first place.

Answer 2

False

Question 3

Of the following statements,which is not a disadvantage of using credit?

A)It can be costly to use
B)It can be difficult to repay if overused
C)It is more difficult to obtain than repay
D)It may tempt you to make impulse purchases

Answer 3

It is more difficult to obtain than repay

Question 4

Improper use of credit may

A)increase your ability to save money.
B)make it necessary to file for bankruptcy.
C)increase your personal wealth.
D)All of the above.

Question 5

Excessive use of credit can impair your ability to save money.

Question 6

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

Question 7

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

Question 8

The impact of credit ________ saving and ________ spending.

A)increases; decreases
B)decreases; increases
C)decreases; decreases
D)Credit has no relationship on saving and spending.

Question 9

Funds provided by a borrower that will be repaid in the future,with interest,is credit.

Question 10

Advantages of using credit are all of the following except

A)the ability to cover cash flow shortages.
B)increases the number of checks written.
C)the ability to buy large items earlier.
D)convenience in making day-to-day transactions.

Question 11

The proper use and control of credit is the best way to build a good credit history.

Question 12

An advantage to credit is it eliminates the need for writing checks.

Question 13

You can begin to build a credit history by having telephone service.

Question 14

Credit cards are an example of revolving open-end credit.

Question 15

If you refrain from using any credit,it will assure you the lowest possible interest rate when you decide to use it.

Question 16

Which of the following is not a disadvantage of using credit?

A)Makes it easier to save
B)The potential high cost
C)The difficulty in paying back loans
D)The potential for personal bankruptcy

Question 17

The ability to save funds is ________ when credit payments are ________.

A)increased; small
B)reduced; small
C)reduced; large
D)Both A and C are correct.

Question 18

Students graduating from college today have an average debt of less than $1,000.

Question 19

Using more credit than can be repaid is a primary cause of individual bankruptcies.

Question 20

In order to have credit in the future,you must have used it wisely in the past.

Question 21

Which of the following will not help you establish a good credit history?

A)Paying your phone bill on time
B)Financing a car and making payments on time
C)Making as many purchases as possible with cash
D)Never exceeding your credit limit on your credit card

Question 22

If you are making a purchase that you know that you will not be able to pay off for a relatively long period of time,you should seek which type of credit and why.

Question 23

The Equal Credit Opportunity Act allows a creditor to deny credit based on a person's age.

Question 24

TransUnion is not one of the three primary credit bureaus.

Question 25

The Fair Reporting Act limits the sharing of credit information.

Question 26

For creating credit scores,credit bureaus rely on a model created by the Fair Isaac Corporation.

Question 27

The most important element in FICO credit scoring is your payment history.

Question 28

The law that prohibits denying credit due to gender,age,race,natural origin,religion,or marital status is

A)Fair Labor Standards Act.
B)the Fair Isaac Act.
C)Equal Credit Opportunity Act.
D)Fair Treatment of Borrowers Act.

Question 29

Your credit report can be requested online and should be checked periodically for errors.

Question 30

Which of the following is not true regarding revolving open-end credit?

A)Credit cards are an example of it
B)A specific maximum amount of credit is established
C)If the balance is not paid off over a period of months,a penalty is incurred
D)Interest is charged on the remaining balance each month

Question 31

Federal law requires creditors to explain the reasons for the denial of credit.

Question 32

Paying your phone bill and electric bill on time each month will help you to establish a(n)________.

Question 33

Historical credit problems normally remain on a credit bureau's report for seven years and ten years for bankruptcy.

Question 34

________ is short-term credit provided by some department stores to consumers to purchase specific items.

Question 35

The longer you maintain relationships with creditors,the lower will be your credit score.

Question 36

The Fair Credit Reporting Act requires credit bureaus to correct any erroneous information on your credit report.

Question 37

Credit extended to consumers for short periods of time to make specific purchases is

A)installment credit.
B)non-installment credit.
C)revolving open-end credit.
D)minimum limit credit.

Question 38

The federal law that prohibits the denying of credit based on gender,age,race,natural origin,religion,or marital status is the ________.

Question 39

Discuss at least three disadvantages of using credit.

Question 40

With a credit rating of over 500,you should have no problem getting approval for credit purchases.

Question 41

You should review your credit report at least ________.

Question 42

Creditors prefer a ________ amount of capital and ________ collateral in the best of circumstances.

A)low; low
B)high; low
C)high; high
D)medium; low

Question 43

Very high credit scores are considered anything over ________.

Question 44

Creditors prefer a ________ level of cash inflows and ________ level of cash outflows.

A)low; low
B)high; low
C)high; high
D)medium; low

Question 45

What steps can you take to improve your credit score?

Question 46

Which of the following would not help improve your credit score?

A)Reducing unnecessary expenditures
B)Destroying some credit cards
C)Applying for more credit cards
D)Notifying creditors of late payments

Question 47

If you find that you will not be able to make credit payments on time,the best course of action is to immediately notify the creditor.

Question 48

Discuss the factors that are used in determining credit scoring in the FICO model.

Question 49

Which of the following statements is not true regarding reviewing your credit report?

A)You will be able to determine if any errors have been made so they can be corrected
B)It will help determine if there are credit cards that you should apply for to improve your credit standing
C)It will reveal the kind of information that lenders will consider when making a decision to extend credit
D)Will reveal deficiencies that you can work to eliminate that will improve your credit rating

Question 50

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

A)the amount of credit used each month.
B)credit payment history.
C)credit utilization.
D)credit inquiries.

Question 51

The minimum credit score required by financial institutions

A)varies by institution.
B)is 500.
C)is 550.
D)is 600.

Question 52

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

A)Social Security number
B)FICO score
C)Unpaid accounts
D)Companies that have recently accessed your report

Question 53

________,________,and ________ are the three major credit bureaus.

Question 54

Historical credit problems remain on a credit bureau's report for ________ years while a bankruptcy remains for ________ years.

A)ten; twenty
B)seven; ten
C)eight; fifteen
D)five; ten

Question 55

Generally,the ________ the credit history,the ________ the credit limit.

A)better; lower
B)worse; higher
C)better; higher
D)None of the above.

Question 56

Credit scores in the 500-600 range will result in

A)lower interest rates.
B)higher interest rates.
C)automatic acceptance of your credit application.
D)preferential treatment of your application.

Question 57

A credit rating (score)of ________ would normally allow you to have easy approval for credit.

A)500
B)600
C)700
D)1,000

Question 58

Which of the following is not one of the three primary credit bureaus?

A)Equifax
B)Experian
C)TransUnion
D)Fair Isaac Corporation

Question 59

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

A)Credit history
B)Race
C)Gender
D)Both A and C

Question 60

Which of the following is not a factor in the FICO credit scoring?

A)Credit utilization
B)Length of relationship with creditors
C)Marital status
D)Number of inquiries

Question 61

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

Question 62

Using a shredder to destroy personal data will protect you from shoulder surfing.

Question 63

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,they are

A)shoulder surfing.
B)dumpster diving.
C)pretexting.
D)skimming.

Question 64

Which of the following may result in much of your personal financial information becoming part of the public record?

A)Marriage
B)Applying for financial aid at a college
C)Purchasing a house with a mortgage
D)Divorce

Question 65

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

Question 66

Manipulating e-mail viruses and host files to redirect users from legitimate commercial Web sites to bogus Web sites to obtain log-in names and passwords is referred to as

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

Question 67

The average individual loss as a result of identity theft has in recent years been

A)decreasing.
B)staying the same.
C)increasing.
D)No pattern is discernable.

Question 68

You should be very selective in shredding documents and when in doubt,do not shred them.

Question 69

Name and briefly discuss three tactics that an identity thief may use.

Question 70

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

A)shoulder surfing.
B)dumpster diving.
C)pretexting.
D)skimming.

Question 71

Identity theft only occurs through individuals who do not have legitimate access to your information.

Question 72

Discuss the reasons why someone would wish to steal your identity.

Question 73

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

A)shoulder surfing.
B)dumpster diving.
C)pretexting.
D)skimming.

Question 74

Identity theft occurs when an individual obtains,without your permission,all of the following information except

A)Social Security number.
B)date and place of birth.
C)drivers license number.
D)bank account number.

Question 75

Obtaining money,goods,and services are the only reasons for identify theft.

Question 76

Obtaining information in order to steal your identity from documents discarded by your bank is an example of

A)shoulder surfing.
B)dumpster diving.
C)pretexting.
D)skimming.

Question 77

Which of the following is the least common manner in which an identity theft victim discovers the crime?

A)Routine examination of a credit report
B)Receiving a collection notice
C)Being denied credit
D)Reviewing a credit card statement

Question 78

Using e-mail messages from a 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 79

Which of the following items should not be removed from your wallet?

A)Social Security card
B)Birth certificate
C)Infrequently used credit cards
D)Drivers license

Question 80

Most identify theft victims discover the crime in a reactive as opposed to a proactive manner.