Unit 2 Practice Test (Applied Math)

How can you build a positive credit history as a college student?

• Get a credit card but don't use it to avoid more debt

• Spend up to your credit limit each month

• Become an authorized user on an adult's card

• Make only the minimum payment each month

T/F: A negative credit event (bankruptcy) can have a WORSE impact on a higher credit score.

• True

• False

Which of the following does NOT contribute to your credit score?

• Your payment history

• Which banks issued your credit cards

• Your debt-to-credit ratio

• Length of credit history

Why might someone have a thin file?

• They've had multiple lines of credit open for 15 years

• They only have 4 types of credit open

• Their parents took out accounts in their name when they were a minor

• You are relatively new to establishing credit

How can having a thin file impact you?

• You are likely to get lower interest rates on your loans

• You may be offered new lines of credit in the mail

• Lenders may decline your application for a loan

• Most landlords will approve you to rent an apartment or home

Where do banks get the money to lend out to consumers?

• From their clients' credit card accounts

• From their clients' savings accounts

• From the Federal government

• From their own money vaults

How do banks make money off of the credit they issue?

• They charge a large, one-time fee at the start of the loan

• They take out a small fee each month from your checking account

• They charge a high interest rate on the loan

• This is a trick question - they DON'T make money!

Which of the following is NOT a typical type of credit?

• Mortgage

• Overdraft

• Credit Card

• Debit Card

Which 2 options are most likely to be a SECURED loan? (hint: choose 2 correct answers)

• Auto loan

• Student loan

• Mortgage

• Overdraft

Why does the amount of INTEREST you owe on a loan decrease over time?

• The institution trusts you more, so they lower the interest

• With each payment, principal increases; so interest lowers

• Banks are legally required to lower interest rates over time

• With each payment, principal decreases, so interest lowers