7.3 Credit Scores

Which will most likely cause your credit score to drop the most?

• Paying a bill on-time

• Missing a payment

• Requesting a copy of your credit report

• Increasing your credit limit on your credit card

You made some mistakes while in college, ran up some large credit card bills, and missed a few payments along the way. Your credit score of 600 is pretty lousy when you graduate, but you get a job paying a salary of $50,000 and figure your credit problems are behind you. Which of the following statements below is TRUE?

• Your credit score will rise quickly once you make at least 3 on-time payments

• Your credit score will immediately jump because the credit agencies will see you have a good paying job

• Finishing your college degree will have a positive benefit on your credit score

• You will likely pay a higher rate of interest or even be denied if you apply for a new car loan upon graduation

Which of the following statements is TRUE?

• Applying for multiple loans or credit cards can cause a drop in your credit score even if you never take out the loan or add a credit card.

• Applying for multiple loans or credit cards can cause a drop in your credit score but only if you take out at least one loan or add a credit card.

• Applying for multiple loans or credit cards will not cause a drop in your credit score, at least if you don’t spend any of the money.

• Applying for multiple loans or credit cards will not cause a drop in your credit score, only auto loans and mortgages can affect your credit score.

What is the most reliable way to improve your credit score?

• Pay ALL your bills on time

• Borrow more money on each of your credit cards

• Increase the credit limit on your credit card

• Review your credit report annually

Which of the following makes up part of your credit score?

• Your salary

• Your employment status

• Whether you rent or own your home

• Whether you’ve applied for a new loan recently

You're about to open a new credit card. Which best describes the relationship between your credit score and the interest rate you'll likely be offered by the credit card company?

• If your credit score is high, your interest rate will be high

• If your credit score is high, your interest rate will be low

• Your credit score will approximately match your interest rate

• There is no relationship between credit score and interest rate

Your credit card has a limit of $10,000, and you carry a balance of $2500. Which best describes your credit utilization rate?

• Your rate is 25%, and that's within a safe range

• Your rate is 25%, and that's too high

• Your rate is $12,500, and that's higher than your credit limit, which will negatively impact your credit score

• Your rate is 4%, and that's within a safe range

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Which of these June 2016 college grads is likely to have the best credit score?

• Joanne, who has no credit cards, paid for her car in cash, and graduated with no student loans

• Vlad, who graduates with $85,000 in student loan debt but gets an amazing job making $90,000 starting salary

• Lucy, who graduates with $10,000 in student debt and has a credit card she's paid on-time, in full each month, for the last 5 years -- since her senior year in high school

• Tomas, who, knowing it's important to build credit, lives entirely on credit his senior year, building up a $6800 bill on his card with a $7200 limit.

The Equal Credit Opportunity Act determines which reasons can be used to deny someone credit. Which of the following is a valid reason?

• Because you filed for bankruptcy more than 10 years ago

• Because you don’t have any credit history in your file

• Because part or all of your income comes from public assistance or Social Security payments

• Because you were not born in the United States

Real estate prices in San Francisco are sky high, and each of the following people are trying to buy an $800,000 condo. Who will probably end up paying the most interest?

• Carlos, who is going to pay the full condo price in cash

• Sarah, who has a credit score of 740 and has a down payment of $175,000

• Ellen, who has a credit score of 645 and has a down payment of $220,000

• Phil, who has a completely blank credit history and has a down payment of $175,000