Deck 6: Managing Your Liquidity - Assessing, Managing, and Securing Your Credit

Question 1

To have credit in the future, you must have used it wisely in the past.

Answer 1

True

Question 2

You can begin to build a credit history by applying for a credit card.

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

Equifax Canada is not one of the three primary credit bureaus.

Question 11

Most students graduating from college or university today have an average debt of less than $1000.

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

The credit score is not allowed to reflect your sex, race, or marital status.

Question 18

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

Question 19

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

Question 20

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

Question 21

One advantage of using credit is that it eliminates the need to carry cash.

Question 22

Filing for bankruptcy will not affect your credit score.

Question 23

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

Question 24

Using a credit card offers you free financing until the due date on your credit card statement.

Question 25

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

Question 26

Shredding documents or statements might be a way to help prevent identity theft.

Question 27

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

Question 28

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

Question 29

There is credit insurance available that will entirely pay off all credit when you cannot work due to accident or illness.

Question 30

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

Question 31

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

Question 32

Obtaining money, goods, and services is the only reason for identify theft.

Question 33

The most important element affecting your credit score is your payment history.

Question 34

A high credit score means that you will pay a higher interest rate.

Question 35

The Fair Credit Reporting Act limits the sharing of credit information.

Question 36

Despite a high credit score your income level may be the determining factor that will cause a lender to not give you a loan.

Question 37

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 38

Unless your identity is stolen by someone out of province, you should only report the crime to local law enforcement.

Question 39

Those that use credit cards as their sole source of credit will have a lower credit score.

Question 40

To create credit scores, credit bureaus rely on a model created called the BEACON score.

Question 41

Creditors that become insolvent and cannot pay their debts must proceed directly to a bankruptcy trustee.

Question 42

Credit cards are commonly used for purchases such as clothing, car repairs, or the purchase of a new car.

Question 43

Contacting the credit bureau to notify them of identity theft is not necessary.

Question 44

If you suspect identity theft, be suspicious and contact the credit card company to cancel the card.

Question 45

During the year you charged $4200 on your MasterCard, but last year's actual budget expenses show that you paid MasterCard $4998, for a total interest charge of 15 percent.

Question 46

A consumer proposal will allow payments to be lowered and made more manageable if accepted by the creditor.

Question 47

Victims of identity theft will not be held responsible for fraudulent charges against their accounts.

Question 48

Credit cards used for cash advances always carry a lower interest rate.

Question 49

Credit represents funds provided by a debtor to a lender that the lender will repay with interest or fees in the future.

Question 50

A line of credit or a credit card is not an example of revolving open-end credit.

Question 51

Sometypes of instalment loans allow Raymond to pay interest only until the maturity date when the loan is due.

Question 52

Not only is interest on a credit card high, it is calculated on the daily outstanding balance.

Question 53

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 54

You should not use savings to pay off a credit card balance.

Question 55

One advantage of credit cards is that you can receive free financing if you pay off your balance each month.

Question 56

Retail store credit cards, such as a Sears card, can be used in a restaurant.

Question 57

If John wants to borrow money to purchase a new car, he can apply for an instalment loan or instalment credit.

Question 58

There is no cost to the merchant when you use a MasterCard or Visa.

Question 59

The credit card limit is only a guideline of how much you can borrow against the card.

Question 60

Investing your money first is better than paying down a credit card debt.

Question 61

A poor credit history will appear on your credit report for

A)10 to 20 years.
B)3 to 10 years.
C)8 to 15 years.
D)5 to 7 years.

Question 62

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 63

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)debt to equity ratio.

Question 64

Which is the most important way to avoid identity theft?

A)Change your social insurance number periodically.
B)Change your passwords and PIN numbers frequently.
C)Use passwords such as your mother's maiden name.
D)Request a credit report every two months.

Question 65

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 66

What is the minimum credit score required by financial institutions?

A)Varies by institution
B)500
C)550
D)600

Question 67

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

A)Employer
B)Length of relationship with creditors
C)Marital status
D)Your previous address

Question 68

Of the following statements, which is a disadvantage of using credit?

A)Interest payments increase cash flow.
B)It can enable you to make convenient purchases.
C)Missing payments can damage your credit score.
D)Using credit will harm your credit score.

Question 69

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

A)decreasing.
B)staying the same.
C)increasing.
D)restricted to credit cards only.

Question 70

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 the new debt payments.
D)It will reveal deficiencies that you can work on to improve your credit rating.

Question 71

Low credit scores may result in

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

Question 72

Which of the following is a correct statement about credit?

A)A debtor provides funds.
B)It is easier to obtain funds than pay them back.
C)Regular repayment is not necessary.
D)The interest is the total amount to be repaid.

Question 73

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

A)Financing a car and making payments on time
B)Making as many purchases as possible with cash
C)Never exceeding your credit limit on your credit card
D)All the above options would have a positive affect on credit history.

Question 74

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 75

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 76

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

A)Arrest due to an identity thief's actions
B)The financial cost to society
C)Loss of access to credit
D)Credit card charges made by the thief

Question 77

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 78

Interest is charged each month on a revolving open-end credit on the outstanding balance.

Question 79

Which BEACON score is the lowest that would normally gain you easy approval for credit?

A)300
B)500
C)700
D)900

Question 80

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

A)Social insurance number
B)Your employment income
C)Unpaid accounts
D)Companies that have recently inquired about your credit report