PFL FP Post-Test Mod 2

Which two statements give good definitions of financial credit?

1. Financial credit is an arrangement for you to pay at a later date. Loans and credit cards are forms of credit.
2. Financial credit is the list of the cast and production crew that runs at the end of a movie
3. Financial credit is recognition by the school that you have fulfilled one of the study or course obligations toward graduation.
4. Financial credit (for instance, your credit rating) is one way that lenders, businesses, and employers may judge an individual's trustworthiness.

• 2 and 3

• 1 and 3

• 3 and 4

• 1 and 4

What is the best way to improve your credit?

• Hire a credit counseling agency.

• Consult your parents on good borrowing practices

• Make all your payments on time, every time

• Make all your payments early except your credit cards. It is OK to pay them late

Good credit equals power. Which statement best illustrates that power?

• Having good credit makes you more dependent on others

• Having good credit impacts what job you get and what you pay for products and services.

• Having good credit makes you less independent.

• Having good credit gives you less buying power.

Good credit helps bring independence. Which statement best illustrates the fact that good credit helps bring independence?

• Good credit can help you build a savings account. Because you pay less in interest when you have good credit, you are able to save more. Money in your pocket (or your savings account) always gives you more options than not having money in your pocket.

• Good credit means you can be entirely independent and don't have to pay your bills on time.

• Good credit means you have to live at home with your parents after college because you cannot get an apartment

• Good credit means you always have to pay more for risk based items like car insurance.

Good credit gives you options. Bad credit takes away your options. Choose the one correct answer.

• You have good credit. You can choose the credit card with the lowest interest rate

• You have bad credit. You are forced to take the credit card which charges rip-off rates.

• You have bad credit. You can easily get a store charge card.

• Both A and B.

Credit is an arrangement for you to pay at a later date. It is one way to determine trustworthiness.

• True

• False

Which of the following people has "paid on time," an important requirement in credit agreements?

• Suzan borrowed $300 from her grandmother to buy an iPad and promised to pay $10 a week for 30 weeks until the loan was paid back. Suzan missed about 8 weekly payments but managed to pay her grandmother the whole amount by the end of the 30 weeks.

• Carlos moved into his own apartment about a year ago. The gas and electric bills are usually due on the 25th of the month. Carlos faithfully pays those bills on the 2nd of the next month when he gets paid.

• Tamara's parents co-signed a car loan for her new wheels. Her monthly payment is due by the 15th of each month. So far she has made the payment each month. But on three months, she sent her payment after the due date because she had not yet received her bi-weekly paycheck from her part-time job. One time she was more than 30 days late.

• Josh has a 36-month loan for his new truck. Each month's payment is due by the 10th of the month. Josh always mails his coupon and payment by the first of the month.

Many companies deliberately give you repayment plans that make sure it will take you decades to pay your debt.

• True

• False

What is a "debt-to-income" ratio?

• How much money you have to pay back on your income

• How much money you owe in total versus how much you make

• How much money you have to make every year in your job

• How much money you owe on your student loan compared with how much you want to make in your job

Why do businesses or individuals considering giving you credit look at your "debt-to-income" ratio?

• They are curious snoops

• They want to see if you have enough total income to pay off all your bills. If you have the income to pay off all your bills, you are probably a better "risk."

• Potential lenders want to know if you can do "ratio math problems."

• They want to see if you can save money