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Unit 4 Credit Review
| Question | Answer |
|---|---|
| What is the primary benefit of maintaining a good credit rating? | Lower interest rates on loans |
| What does credit history affect your ability to do? | open a bank account, buy a car, rent an apartment, get a loan or a credit card |
| Identify the 3 credit bureaus | Equifax, Experian, Transunion |
| At what website can you obtain free credit reports from the three major credit bureaus? | www.annualcreditreport.com |
| In terms of credit, what is capacity? | the borrower’s ability to repay the loan |
| In terms of credit, what is character? | the borrower’s bill-paying history or likelihood of repaying the loan based on past loans |
| In terms of credit, what is collateral? | financial assets or property that the borrower has that the lender can take if the loan is not repaid |
| What is collateral in the context of a loan? | An asset that can be seized if payments are not made |
| What is the primary benefit of maintaining a good credit rating? | Lower interest rates on loans |
| A consumer’s credit report does not include the consumer’s _______________ | race, religion, and gender |
| Most negative information included in credit reports can be removed after ___ years, except a bankruptcy which can stay on your credit report up to ____ years. | 7; 9 |
| Credit scores are designed to indicate the ______ that a person will repay a loan or credit obligation on time. | risk |
| What is the most important factor in calculating credit scores? | payment history |
| What is the main purpose of a credit report? | to assess creditworthiness |
| Do credit bureaus decide whether or not you get approved for a loan? | No |
| Is income a component that is included in a credit report? | No |
| How often can you obtain a free credit report from each of the three major credit bureaus? | once a year |
| What is a disadvantage of declaring bankruptcy? | It stays on your credit report for up to 10 years |
| Which type of bankruptcy involves a court-approved repayment plan? | Chapter 13 |
| True or False: A FICO credit score is a three digit number based on a person's credit report, and it is used to determine loan eligibility and the interest rates that people may pay. _ | True |
| Which credit score category accounts for about 35% of the credit score calculation and takes into account bills that are paid late, how late they were paid, how recent the delinquency was, and the total amount owed? | payment history |
| Which credit score category accounts for about 30% of the credit score calculation and considers your debt-to-credit ratio? | Amounts owed |
| Which credit score category accounts for about 15% of the credit score calculation and takes into consideration how long you've had your credit accounts? | Length of credit history |
| Which credit score category may be negatively affected if a consumer has recently taken out a new mortgage and applied for a few new credit cards? | Frequency of new credit |
| If a consumer has a mortgage loan, a student loan, and a car loan in addition to a credit card account, he may score higher in which credit score category? | Types of credit used (Credit mix) |
| _____________ is a consumer credit scoring model developed by the three nationwide credit reporting agencies (NCRAs)—Equifax, Experian and TransUnion. | VantageScore |
| True or False: Regardless from which credit reporting agency you receive your credit score from, the score will be the same. | False |
| Lenders generally see credit utilizations under _____% more favorably. | 30% |
| What is credit primarily defined as? | Money you borrow and promise to pay back later |
| Becoming an ___________________ on a parent’s credit card can help improve your credit score. | authorized user |
| Why is it important to check your credit reports regularly? | To look for errors or fraud |
| Is having no credit the same as having bad credit? | No |
| An example of a revolving line of credit, where how much you pay back each month depends on how much you use, would be a ________________. | credit card |
| The main difference between a secured credit card and an unsecured credit card is that a secured credit card requires _________________ in the form of a deposit, which sets your credit limit. | collateral |
| Is it a good idea to go into debt, even for something you don't need, in order to build credit? | No |
| ______________ loans are loans where instead of giving the money to you, the lender puts it in a special savings account that once you've paid it off, you get the total amount of the loan minus a small amount of interest. | Credit builder |
| True or False: Without intervention, such as signing up for a rent reporting service, rent payments don't show up on your credit report, so they don't affect your credit score. | True |
| What types of payments does Experian Boost add to your credit report to help “boost” your credit score if those payments are on time? | it recently added rent to the growing list of payments it will add to your credit report, including utility bills and streaming service subscription fees. |
| Do store credit cards usually have a lower interest rate than standard bank credit cards? | No |
| Which uses of a store credit card will improve your credit score? | using less than 30% of your store credit card's credit limit monthly |
| The range of a typical credit score is from ______ to ______. | 300 to 850 |
| What could a low credit score mean for insurance premiums? | Higher monthly insurance rates. |
| What can poor credit lead to in terms of loan costs, such as fees, interest, and down payments? | Higher fees and larger down payments. |
| A credit score around 500 means you have _______ credit, it’s__________ to lend money to you. | bad; riskier |
| ___% is the usual percentage of the debt that is charged for minimum payment each month. | 30% |
| What are the advantages of using credit cards over debit cards? | cash back rewards builds your credit better fraud protection |
| What happens if you miss your grace period on a credit card payment? _ | You will be charged interest |
| What is a balance transfer? | Moving debt from one credit card to another |
| What is a cash advance? | Taking money from an ATM using a credit card |
| If you only make the minimum payment on your credit card, what is the likely outcome? | Longer time to pay off debt and end up paying more interest |
| When it comes to using credit cards, it is best to pay off _______________ in full, to pay as agreed to help you to avoid any late payment reporting and collections, and to keep your card balances below _____ % of available credit. | balances; 30% |
| This is a loan specifically used to finance the purchase of real estate, with the property itself serving as collateral for the loan. | mortgage |
| This is a type of financial loan specifically designed to help students pay for higher education expenses. | student loan |
| This a financial instrument that allows users to borrow funds from a line of credit for purchases | credit card |
| This is a common method of financing for both new and used vehicle purchases | auto loan |
| What is a disadvantage of rent-to-own instead of purchasing an item outright? | Higher overall cost and potential additional fees |
| In a typical rent-to-own agreement, if a renter misses a payment, what is the consequence? | the renter is required to return the item and has nothing to show for the money spent. |
Created by:
teacherdavidfrost
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