Question 1

Which of the following is NOT a credit bureau?

Accepted Answer

FICO is not a credit bureau. It is a company that provides credit scoring models used by credit bureaus to calculate credit scores.

Question 2

Which of the following is the only online source authorized to provide a free credit report each year at your request?

Accepted Answer

The only online source authorized to provide a free credit report each year at your request is www.AnnualCreditReport.com. Beware of other sites that may offer free credit reports but require you to sign up for a paid service or may be fraudulent.

Question 3

If you are denied credit,you can contact the credit bureau and ask for a copy of your credit report.The bureau cannot charge a fee for this service as long as you ask to see your files within

Accepted Answer

The answer of If you are denied credit,you can contact...

Question 4

The Equal Credit Opportunity Act (ECOA)prohibits a lender from discriminating based on

Accepted Answer

The ECOA prohibits discriminatory practices by lenders based on all of the listed factors (race, nationality, age, and sex), as well as other factors such as marital status and receipt of public assistance.

Question 5

Which of the following is the best scoring technique used in credit applications for consumers with limited credit histories?

Accepted Answer

VantageScore is specifically designed to evaluate consumers with limited credit histories, making it the best choice for credit applications in such cases.

Question 6

A loan officer is examining whether or not to will offer you a loan today.Specifically,she is examining your income and debts.Which of the five Cs is the loan officer reviewing?

Accepted Answer

Capacity refers to the borrower's ability to repay the loan, which entails examining their income and debts. Therefore, the loan officer is reviewing the borrower's capacity.

Question 7

Which of the following is NOT a valid credit application question?

Accepted Answer

All of the options listed (A through D) are valid questions that can be found on a credit application. They are used to assess the applicant's financial situation and reliability.

Question 8

Before taking out a loan,you should ask yourself whether you can meet all of your essential expenses and still afford the monthly loan payments.This can be determined by

Accepted Answer

By adding up basic monthly expenses and subtracting this total from take-home pay, you can determine if you have enough leftover income to afford monthly loan payments. If needed, you can then also figure out what expenses you can reduce to make the payment manageable. Option A is correct but doesn't account for adjusting expenses. Option B is incorrect because you don't necessarily need to give up anything, but rather adjust your expenses. Option C is incorrect as it's an arbitrary calculation that doesn't account for your actual expenses.

Question 9

When evaluating your credit application,a lender may NOT

Accepted Answer

It is illegal for a lender to discriminate against an applicant who receives public assistance.

Question 10

The question "Will you repay the loan? " relates to

Accepted Answer

The question about whether or not someone will repay a loan relates to their character, or their honesty and willingness to fulfill their obligations.

Question 11

A credit report includes

Accepted Answer

The answer of A credit report includes
...

Question 12

When calculating the debt-to-equity ratio,the following is NOT included:

Accepted Answer

The answer of When calculating the debt-to-equity ratio,the following is...

Question 13

Credit bureaus get their information from all of the following except

Accepted Answer

Credit bureaus do not get their information from references. They obtain information about an individual's credit history from banks, credit card companies, finance companies, and stores.

Question 14

The use of property or savings to secure a loan relates to

Accepted Answer

The use of property or savings to secure a loan relates to collateral. Collateral refers to assets or property that are pledged as security for a loan, in the event the borrower is unable to repay the loan.

Question 15

The question "What are your assets and net worth? " relates to

Accepted Answer

The question is asking about the person's financial resources, which relate to the capital aspect of the 5 Cs of credit. Assets and net worth are used as collateral and indicate the person's capacity to repay a loan, but they do not necessarily speak to their character or the conditions of their financial situation.

Question 16

If you have reached the upper limit of debt obligations,your debt-to-equity ratio is about

Accepted Answer

The debt-to-equity ratio represents the amount of debt a company has relative to its equity. A ratio of 1 means that the company has an equal amount of debt and equity. If a company has reached its upper limit of debt obligations, that means it cannot take on any more debt without significantly increasing its risk of default. This would result in a debt-to-equity ratio of 1, as there is no more room to take on additional debt.

Question 17

Bankruptcy courts treat gift cards

Accepted Answer

Bankruptcy courts typically handle gift cards the same way they handle unsecured debt, as it is owed to the gift card holder without any collateral attached. This means that the gift card holder may receive a fraction of the value owed to them, similar to other unsecured creditors in a bankruptcy case.

Question 18

Experts suggest that the debt payments-to-income ratio should be a maximum of

Accepted Answer

Experts suggest that the debt payments-to-income ratio should be a maximum of 20%. This means that no more than 20% of your monthly income should be used to pay off debt.

Question 19

What step can you take if your credit application is denied?

Accepted Answer

Asking why you were denied credit can provide valuable information on how to improve your creditworthiness in the future or to correct any errors in your credit report. It is important to address any issues before reapplying for credit. Options A, B, and E are not appropriate or possible courses of action. Waiting 30 days to reapply for credit may not necessarily improve your chances of approval if the underlying issues that led to the initial denial have not been addressed.

Question 20

FICO scores generally range from

Accepted Answer

FICO scores generally range from 350 to 850.

Quiz 5: Consumer Credit: Advantages, Dis-Advantages, Sources, and Costs