Foundations in Personal Finance Chapter 4

Which of the following is NOT a factor in creating 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 makes you go further into debt?

• Quit borrowing money

• Get a part-time job or work overtime

• Sell something

• Borrow money from your parents to pay for debt

Which of the following can't be done with a debit 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

• Length of debt

• All of the above

Which of these is the most cost effective way to purchase a house?

• Get a 15-year mortgage with a 5% down payment

• Get a 30 year mortgage so you can get the lowest possible payments

• Save up and pay for the house with cash, if that is not an option then get no more than a 15-year mortgage with at least 10% downpayment.

• Get a 30 year mortgage with a 20% down payment.

Which is not suggested in the debt snowball method of paying off your debt?

• List your debts in order from smallest to biggest and pay off the smallest one 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 the next debt payment

What is paycheck garnishment?

• A court-ordered attachement that allows a lender to take money directly from your paycheck

• A process of taking something back for failure to make payments

• Process by which the lender of a mortgage sells the property of a homewowner who has falled behind on payments

• A legal prceedure for dealing with debt problems of people and businesses.

Which of the following best summarizes how the use of a credit card for purchases instead of cash can change your 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 behavior whether a person uses cash or

  credit.

• People typically spend less when they know that they are earning credit card ʺrewards.ʺ

• Studies show that consumers typically spend more when using credit as opposed to cash purchases.

Which of the following is NOT a credit myth?

• The lottery and other forms of gambling will make you rich.

• You have ʺarrivedʺ financially once you get approved for a credit card.

• Debt is a tool and should be used to create prosperity.

• Borrowing money can have serious consequences and prevent you from building wealth.

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

mortgage?

• History of rental and utility payments

• Amount of your down payment and employment history

• You cannot get a mortgage without a credit history

• A and B