Question 1

Under the Equal Credit Opportunity Act,lenders may not use a numeric scoring system for deciding who may or may not receive credit.

Accepted Answer

This statement is false. Lenders may use a numeric scoring system, also known as a credit scoring system, to evaluate creditworthiness and determine who may or may not receive credit. However, the system must be based on factors that are not discriminatory, such as race or gender.

Question 2

A debit card usually has a 30-day grace period.

Accepted Answer

Debit card transactions are usually processed immediately, meaning there is no grace period for repayment. The funds are deducted from the account linked to the card right away.

Question 3

The primary function of a credit bureau is to evaluate a credit application and assign a credit limit.

Accepted Answer

The primary function of a credit bureau is to collect and maintain information on consumers' credit histories and make it available to creditors and lenders to help them evaluate credit applications and determine creditworthiness. The credit bureau itself does not assign a credit limit.

Question 4

A potential employer is prohibited by the Fair Credit Reporting Act from checking your credit report.

Accepted Answer

A potential employer is allowed to check your credit report with your permission under the Fair Credit Reporting Act. However, they are required to follow specific rules and regulations regarding how they use the information obtained from the report in making hiring decisions.

Question 5

A debit card is simply a credit card with a larger credit limit and extended payment terms.

Accepted Answer

A debit card is not a credit card. Unlike a credit card, a debit card directly deducts funds from the user's bank account at the time of transaction, and no credit card debt is accumulated. Additionally, debit cards generally have lower credit limits or no credit limit at all.

Question 6

You usually open a regular charge account as a shopping convenience.

Accepted Answer

Opening a regular charge account allows for easier and more convenient shopping by allowing customers to purchase items on credit and pay for them at a later time.

Question 7

Given a choice,it is generally better to use a credit card instead of a debit card.

Accepted Answer

Using a credit card offers more benefits than using a debit card including rewards programs, fraud protection, and building credit history. Additionally, if there is an unauthorized charge on the credit card, the customer is not liable for more than $50, whereas with a debit card, the customer can potentially lose all the money in their account. However, it is important for consumers to use credit cards responsibly and avoid accumulating debt.

Question 8

The law gives you the right to one free credit report each year.

Accepted Answer

The Fair Credit Reporting Act (FCRA) gives every consumer the right to request a free copy of their credit report once every 12 months from each of the three major credit reporting agencies (Equifax, Experian, and TransUnion).

Question 9

The "adjusted balance method" is more favorable to consumers than the "previous balance method."

Accepted Answer

The answer of The "adjusted balance method" is more favorable...

Question 10

Visa and MasterCard credit is usually expensive credit if it is used as a form of permanent credit.

Accepted Answer

Visa and MasterCard credit usually come with high APRs and other fees, making them expensive options for long-term financing needs. It is recommended to use them only for short-term expenses that can be paid off quickly to avoid accruing large amounts of interest.

Question 11

If you have a dispute over an item on your credit statement,you should refuse to pay the entire statement until the dispute is settled.

Accepted Answer

You should still pay the undisputed amount on your credit statement to avoid late fees and negative impacts on your credit score. Instead, contact the credit card company and follow their dispute resolution process to resolve the issue.

Question 12

Based upon your credit report,the credit bureau will determine who may receive a credit card.

Accepted Answer

Credit bureaus do not determine who receives a credit card; they provide credit reports and scores. Lenders use this information to make their own credit decisions.

Question 13

The higher your credit score,the easier it is to obtain credit.

Accepted Answer

A higher credit score is considered a positive indication of creditworthiness, which makes it easier to obtain credit. Lenders are more likely to offer lower interest rates and more favorable terms to individuals with higher credit scores. On the other hand, individuals with lower credit scores may have a harder time getting approved for credit or may have to pay higher interest rates and fees.

Question 14

Huey Looz had an unpaid balance of $200 on his credit account last month.This month he charged $100 and made a payment of $20.Using the previous balance method and an APR of 18%,Huey owes $2.70 interest this month.

Accepted Answer

Using the previous balance method, the interest for the month is calculated on the balance from the last statement, which was $200. With an APR of 18%, the monthly interest rate is 1.5% (18% / 12 months). Therefore, the interest for the month is $200 * 1.5% = $3.

Question 15

If you have been denied credit,you have the right to receive a free copy of your credit report.

Accepted Answer

The Fair Credit Reporting Act (FCRA) gives consumers the right to receive a free copy of their credit report if they have been denied credit, as well as in other circumstances such as if they are unemployed and seeking employment, or if they suspect fraud or identity theft.

Question 16

Employers sometimes obtain credit reports on prospective employees.

Accepted Answer

Employers are allowed to obtain credit reports on prospective employees for a variety of reasons, such as evaluating whether the employee is financially responsible and trustworthy. However, employers must follow certain legal requirements when obtaining and using these reports.

Question 17

The American Express Card is an example of a bank credit card.

Accepted Answer

The American Express Card is an example of a charge card, which requires the balance to be paid in full each month, unlike bank credit cards that allow for revolving credit.

Question 18

A revolving credit account provides a credit limit and a minimum monthly payment.

Accepted Answer

A revolving credit account provides a line of credit that can be used up to a specific limit, and requires a minimum payment each month (which is typically a small percentage of the balance owed). The credit can be used again once it is paid off, hence the term "revolving".

Question 19

Visa and MasterCard are bank cards.

Accepted Answer

Visa and MasterCard are two of the most popular and widely accepted bank card networks in the world. They are both used for making electronic payments, and are issued by financial institutions such as banks and credit unions.

Question 20

Opening a retail charge account is one way of establishing a credit record.

Accepted Answer

Opening a retail charge account requires a credit check and allows for monthly payments, which helps establish a credit record.

Quiz 6: Short-Term Credit Management: Consumer Credit