Foundations in Personal Finance Chapter 4 Debt Review

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

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

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

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

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

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

What factors affect a credit score? 

• New debt 
• Type of debt
• Duration of debt 
• All of these 

Which of the following is a sign that your identity may have been stolen? 

• Your credit report shows accounts you didn't open
• A call from a collection agency about a debt you didn't incur
• Bank and billing statements don't arrive on time
• All of these 

Which of the following is not a credit myth? 

• Borrowing money can have serious consequences and prevent you from building wealth.
• The lottery and other forms of gambling will make you rich.
• You have "arrived" financially once you get approved for a credit card.
• Debt is a tool and should be used to create prosperity.

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

• Every extra dollar you get should be thrown at the largest debt first.

• List your debts in order from smallest to largest balance and focus on paying the smallest debt off first.

• Attack your debt with intensity.

• Every time you pay off a debt, you add its old minimum payment to your next debt payment.

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

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

If you do not have a FICO score, what factors will determine whether or not you qualify for a mortgage?

• Your age
• Amount of your down payment and employment history
• You cannot get a mortgage without a credit history
• None of these

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 is 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