Chapter 4 Personal Finance

Which of the following is not a factor in determining a FICO score?

• Getting a personal loan from a bank 
•  Using credit cards 
•  Paying cash for all purchases
• Taking out a mortgage on a house 

Which of the following is not a good idea for getting out of debt?

• Quit borrowing money 
• Get a part-time job or work overtime 
• Sell something 
• Borrow money from your parents to pay for the debt 

Which of the following things cannot be done with a debt card but can be done with a credit card?

• Go into debt
• Rent a car 
• Purchase something online 
•  Purchase an airline ticket 

What factors affect a credit score?

• Type of debt 
• New debt
• Duration of debt 
• All of the above

Which of the following statements is false?

• Prior to the FRCA, consumers were unable to challenge errors in their credit reports.
• Under FRCA, consumers are allowed to receive on free credit report every five years.
• The U.S. Congress enacted the Fair Credit Reporting Act to address concerns over consumer credit report accuracy, privacy, and fairness.
• Under FRCA, creditors must notify consumers if they deny credit based on a credit report file, and they must also tell the consumer which of the three credit bureaus provided the report.

Which of the following is not a recommended step in the Drive Free method of purchasing a car?

• Plan your purchase in advance using the sinking fund method of saving. 
• Place your savings in a mutual fund so that your money can make more money.
• Start with an inexpensive car and gradually move up in car value as your savings increase.
• Explore new car dealerships for the best interest rate. 

Which of the following is the most cost-effective option for purchasing a home?

• Get a 15-year mortgage with a 5% down payment. 
• Get a 30-year mortgage so that you can get the lowest possible payments
• The most ideal way to buy a house with 100% down; if that is not an option, you should get no more than a 15-year, fixed rate mortgage with a down payment of at least 10%.
• Get a 30-year mortgage with a 20% down payment. 

Which of the following is not recommended in the debt snowball method of getting out of debt? 

• List your debts in order from smallest to largest balance and focus on paying the smallest debt first.
• Every extra dollar you get should be thrown at the largest debt first. 
• Attack your debt with intensity. 
• Every time you pay off a debt, you add its old minimum payment to your next debt payment.

What is a paycheck garnishment?

• A court-ordered attachment that llows a lender to take monies owed directly from a borrower's
• Process of taking something back for failure to make payments. 
• Process by which the holder of a mortgage sells the property of a homeowner who has fallen behind on payments
• A legal procedure for dealing with debt problems of individuals and businesses

Which of the following best summarizes how the use of a credit card for purchases instead of cash can change one's spending behavior?

• Spending behavior does not matter as long as you pay off the credit card balance each month.
• Studies show that there is no change in spending bahior whether a person uses cash or credit
• People typically spend less when they know that they are earning credit card "rewards".
• Studies show that consumers typically spend more when using credit as opposed to cash purchases