Question 1

The borrower's financial ability to meet credit obligations is called

Accepted Answer

Capacity refers to the borrower's ability to repay a loan, including their income, expenses, and other financial obligations. This is a crucial factor in determining whether they can handle the credit they are seeking.

Question 2

When a creditor looks at the borrower's attitude toward credit obligations, which of the 5 Cs of credit is she analyzing?

Accepted Answer

The attitude of the borrower toward credit obligations falls under the category of character, which refers to an individual's willingness to repay their debts.

Question 3

Which of the following is not an example of revolving credit?

Accepted Answer

A mortgage is a type of installment credit where the borrower receives the entire loan amount upfront and repays it in fixed, regular payments over a set period of time. It is not a type of revolving credit where the borrower has access to a pre-approved credit limit and can borrow and repay money multiple times within that limit.

Question 4

Questions you should consider before you decide how and when to make a major purchase include all except

Accepted Answer

All of these questions should be considered before making a major purchase as they can help you make an informed decision about whether or not to proceed with the purchase, how much you can afford to spend, and what the long-term financial impact of the purchase may be. It's important to consider factors such as your cash flow, savings, and other financial obligations before making any significant purchase, and to weigh the pros and cons of using credit versus paying with cash or savings. Additionally, it's always a good idea to ask yourself if the purchase is truly necessary or if you could postpone it until a later time when you're in a better financial position.

Question 5

A term that refers to the borrower's assets or net worth is called

Accepted Answer

Capital refers to the borrower's assets, net worth, and financial position, which indicate their ability to repay the loan.

Question 6

If your credit application is denied, you

Accepted Answer

Asking to know specifically why your credit application was denied can help you to address any issues or errors on your credit report and potentially improve your creditworthiness before reapplying for credit in the future. Additionally, understanding the reasons for the denial can help you to make better financial decisions and avoid the same mistakes in the future.

Question 7

A valuable asset pledged to assure loan payments and subject to seizure upon default is called

Accepted Answer

Collateral is a valuable asset pledged to assure loan payments and subject to seizure upon default.

Question 8

If you have incorrect information in your credit file,

Accepted Answer

There are legal remedies available to individuals who have incorrect information in their credit file. They can dispute the inaccurate information with the credit bureau and provide supporting evidence such as receipts or statements to prove their case. If the credit bureau cannot verify the information, they must remove it from the individual's credit file. Additionally, individuals have the right to file a complaint with the Consumer Financial Protection Bureau or take legal action if necessary.

Question 9

If you are a woman, a creditor must

Accepted Answer

A creditor must consider income from part-time employment when determining credit eligibility for a woman. The other options are either discriminatory or illegal under the Equal Credit Opportunity Act.

Question 10

In evaluating your credit application, a lender may

Accepted Answer

The answer of In evaluating your credit application, a lender...

Question 11

Valid reasons for using credit include all of the following except

Accepted Answer

Borrowing for everyday living expenses is not a valid reason to use credit as it can lead to a cycle of debt and financial instability. It is important to have a budget and live within your means to avoid relying on credit for daily expenses.

Question 12

Which of the following is considered to be a consumer loan?

Accepted Answer

The answer of Which of the following is considered to...

Question 13

What percentage of Canadian households carry 1 or more credit cards

Accepted Answer

More than 80% of Canadian households carry one or more credit cards, indicating a high reliance on credit for financial transactions in the country.

Question 14

The borrower's attitude toward his or her credit obligations is called

Accepted Answer

The borrower's attitude toward his or her credit obligations is called character. This is an important factor that lenders consider before granting a loan or credit. It reflects the borrower's level of responsibility, dependability, and trustworthiness in repaying the debt on time. Factors such as credit history, employment stability, and financial management skills contribute to the borrower's character.

Question 15

If you are an Ontario resident and you have declared personal bankruptcy for the first time, that fact may be reported by credit bureaus for ____________ years.

Accepted Answer

When an Ontario resident declares personal bankruptcy for the first time, that fact may be reported by credit bureaus for up to 7 years. This can affect their credit score and ability to obtain credit in the future. It is important for individuals to understand the potential long-term consequences of declaring bankruptcy and explore all other options before making this decision.

Question 16

The best way to maintain your credit rating is to

Accepted Answer

Repaying debts on time is the best way to maintain good credit. This shows lenders that you are a responsible borrower and can be trusted to make timely payments. Using credit sparingly and not accumulating too much debt is also important, but repayment is critical to maintain a good credit rating. Paying cash for purchases and declaring bankruptcy will not have any impact on your credit rating, and using multiple credit cards can actually harm it if you accumulate too much debt or miss payments.

Question 17

What percentage of credit card users generally pay off their balance in full every month?

Accepted Answer

The answer of What percentage of credit card users generally...

Question 18

A loan officer is examining your income and the amount of your existing debt payments to help in the decision to make a loan to you today.Which aspect of the Five Cs of lending is the loan officer most likely looking at?

Accepted Answer

The loan officer is most likely looking at the capacity aspect of the Five Cs of lending, which refers to the borrower's ability to repay the loan based on their income and existing debt payments.

Question 19

If you think that your bill is wrong, you should first

Accepted Answer

The best initial course of action is to directly notify the creditor of the error. This allows them to investigate and correct the mistake in a timely manner without involving external agencies or legal action.

Question 20

The advantages of credit include

Accepted Answer

All of these choices are advantages of credit. Credit allows individuals to make purchases even when funds are low, carrying credit cards can be safer than carrying cash, credit cards can provide a 30-day grace period known as a "float", and credit cards may be used as identification when cashing a cheque.

Quiz 5: Introduction to Consumer Credit