Question 1

A poor credit history will appear on your credit report for

Accepted Answer

A poor credit history typically appears on your credit report for 3 to 10 years, depending on the type of negative information.

Question 2

Which of the following is an advantage of using credit?

Accepted Answer

Using credit reduces the need to carry cash, making it more convenient and safer than carrying around large amounts of cash. It also provides a way to build credit history and access to larger purchases that may not be possible with cash. However, it should be used responsibly to avoid accruing high interest rates and debt.

Question 3

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

Accepted Answer

Credit payment history is the most heavily weighted factor in the BEACON credit scoring system, with a weighting of 35%. This means that lenders consider a borrower's history of making timely payments on their credit accounts to be the most important factor in determining their creditworthiness. The amount of credit used each month, credit use, and debt to equity ratio are all also important factors, but they are given less weight than credit payment history in the BEACON scoring system.

Question 4

Which is the most important way to avoid identity theft?

Accepted Answer

Changing passwords and PIN numbers frequently is an important way to avoid identity theft as it makes it harder for hackers to access your personal information. Using strong and complex passwords is also recommended. Changing your social insurance number is not a common practice and may cause other problems such as issues with government benefits or taxes. Using passwords such as your mother's maiden name is not secure as this information can often be easily found online. Requesting a credit report every two months is not a preventative measure but can help detect identity theft if it has already occurred.

Question 5

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

Accepted Answer

Shoulder surfing is the act of visually or audibly eavesdropping on someone to obtain sensitive information such as a credit card number. This can be done by standing close enough to the person to see their card or hear their conversation. Pharming is an online attack that redirects users to a fake website to obtain their personal information. Pretexting is a social engineering method where an attacker pretends to be someone they're not to gain information from the victim. Skimming is the act of stealing credit card information by using a device to copy the magnetic strip on the card.

Question 6

What is the minimum credit score required by financial institutions?

Accepted Answer

The minimum credit score required by financial institutions varies by institution. Different lenders have different standards for creditworthiness, so there is no universal minimum credit score requirement for all financial institutions. However, in general, a higher credit score is more likely to result in better loan terms and interest rates.

Question 7

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

Accepted Answer

Marital status is not a factor in the BEACON credit scoring, while the other options are considered factors.

Question 8

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

Accepted Answer

Missing payments can damage your credit score, which is a disadvantage of using credit.

Question 9

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

Accepted Answer

According to the Identity Theft Resource Center, the average individual loss as a result of identity theft has been increasing in recent years. In 2019, the average was $1,050 per person, which was a 16% increase from the previous year.

Question 10

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

Accepted Answer

Reviewing your credit agency report will help you identify any errors or deficiencies in your credit history that could be negatively impacting your credit rating. By identifying these issues, you can take steps to address them and improve your credit standing over time. Options A and B are incorrect because you do have the authority to make corrections to your credit agency report, and reviewing your report is not necessarily about applying for new credit cards. Option C is also incorrect because your credit agency report does not typically include information about your income.

Question 11

Low credit scores may result in

Accepted Answer

Low credit scores typically result in higher interest rates as they are perceived as higher risk borrowers by lenders.

Question 12

Which of the following is a correct statement about credit?

Accepted Answer

Obtaining credit can be easier than repaying it, as repayment requires consistent financial discipline and planning.

Question 13

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

Accepted Answer

Making as many purchases as possible with cash means that there is no credit being utilized, which does not provide any opportunity to build a positive credit history.

Question 14

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

Accepted Answer

A student loan is a classic example of an instalment loan as it is borrowed over a fixed period of time and is repaid in fixed regular payments (instalments) over the term of the loan. A credit card, on the other hand, is a form of revolving credit where there is no set repayment term, and the borrower can choose to pay the minimum payment, pay in full or somewhere in between. A line of credit is another form of revolving credit, and a demand loan is a type of loan where the lender can call the loan at any time.

Question 15

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

Accepted Answer

Credit history is a commonly used factor in determining a person's creditworthiness. It provides information about past credit usage and payment behavior, which can be used to predict future behavior. Marital status and gender are not relevant factors in determining creditworthiness and should not be used as criteria for granting credit.

Question 16

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

Accepted Answer

Arrest and criminal charges resulting from an identity thief's actions can have serious consequences for the victim, potentially leading to legal and financial troubles. The other options, while still harmful, are more manageable and often can be resolved with assistance from financial institutions and credit reporting agencies.

Question 17

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

Accepted Answer

Applying for more credit cards can actually harm your credit score as it can lower your average account age and result in multiple hard inquiries on your credit report. The other choices can help improve your credit score: reducing unnecessary expenditures can free up money to pay off debts, destroying some credit cards can reduce your available credit and therefore your credit utilization ratio, and notifying creditors of late payments shows that you are taking steps to address any issues and can prevent further damage to your score.

Question 18

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

Accepted Answer

This is the standard practice for revolving open-end credit accounts, such as credit cards. Interest is charged each month on the balance that is not paid in full by the due date.

Question 19

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

Accepted Answer

Generally, a BEACON score of 700 or higher is considered good and would likely result in easy approval for credit. Scores below 700 may still be approved but could result in higher interest rates and less favorable loan terms. A score of 300 is the lowest possible score, while a score of 900 is the highest, but scores in these ranges are not common.

Question 20

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

Accepted Answer

The answer of Which of the following will not be...

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