Personal Finance Units 3-6 Review

The major purpose of the Equal Credit Opportunity Act is to:

• Make it easier for individuals to file for personal bankruptcy when they get into credit card debt
• Prohibit creditors from using age, religion, or race to deny credit to a person
• Make sure people are billed at least once a month for any outstanding debt
• Provide a way for people to correct mistakes that they believe have been made on their credit reports

The information collected by credit bureaus such as Experian is accessible to:

• Only the person whose information has been collected
• Anyone who puts in a written request to the credit bureau
• Only banks and other financial institutions considering making a loan to the person
• The person’s potential employers, landlords, and lenders

Why might a person decide to take advantage of a non-installment credit offer?

• Interest on this type of loan is much lower than interest on other types of loan
• The loan can be paid back without interest charges any time within one year
• The loan offered by Company A can be used to purchase items at Company B
• There is no interest charged on the loan if it is paid back within a very short time

If a person has a credit card with a limit of $2,000 it means that:

• He will not be charged interest on purchases until he uses the credit card to make purchases over the $2000 limit
• He must pay the full credit card balance each month even if it is under $200
• The credit card company is loaning him up to $2000 to make purchases. He can pay the entire card balance each month or pay part of the bill and pay interest on the rest.
• He earns interest at the bank that issued the credit card on purchases made up to the $2000 limit. That interest is subtracted from the balance owed each month.

When a person brings an item to a pawnshop to obtain cash, the transaction is considered:

• A collateralized loan
• A custodial payment
• An unsecured loan
• A sales agreement

Which of the following is considered to be open-ended credit?

• A mortgage loan
• A car loan
• A department store credit card
• An installment loan

What is meant by an uncollateralized loan?

• A loan not backed by a co-signer who agrees to cover the amount of the loan
• A personal loan without assets to cover the loan amount
• A home equity loan
• A loan taken on a life insurance policy

Which of the following lenders charge the highest interest rate?

• Bank
• Credit Union
• Pawn Shop
• Investment Firm

The definition of credit is:

• Using someone else’s money, promising to repay in the future for a fee
• Interest on money invested
• Using your money to finance a purchase
• None of the above

Your creditor determines your creditworthiness based on:

• Address
• Gender
• Education
• Character, collateral, and capacity