Personal Finance - Credit Exam Review

What are the two most important factors in calculating your credit score?

• Payment history and types of accounts

• Amounts owed and length of credit history

• Payment history and total debt

• Length of credit history and new credit inquiries

All of the following would be beneficial strategies to pay off debt EXCEPT…

• Reducing spending by canceling some of her streaming subscriptions

• Taking extra shifts at work to increase her income

• Making more than the minimum required payment on her debt

• Applying for another credit card to use in case she runs out of cash paying off her debt

Your friend confides in you that he has a low credit score. What is the single best way for him to improve his score?

• Cancel his credit cards

• Make on-time payments

• Get a car loan

• Check his credit score

How long does negative information remain on your credit report?

• 1 year

• 7 months

• 7 years

• forever

Melvin is 19 years old and wants to begin establishing a credit history. Which action could he take to meet that goal?

• Always say "credit" when asked "credit or debit?" at a store

• Ask his parents to cosign a credit card or add him as an authorized user on their credit card

• Any time he borrows money from a friend or family member, be sure to pay it back promptly

• Take out some private student loans, even though he doesn't need them because he has grants and scholarships

You have a credit card that you use regularly for small purchases with the goal of improving your credit score. Which strategy would have the GREATEST positive impact?

• Use less than 30% of the credit limit and pay it off in full every month by the due date

• Always carry a balance from month to month

• Regardless of how much your balance is, make the minimum payment required on your credit card every month by the due date

• Put the credit card in a drawer instead and don't ever use it

Which of the following could have a NEGATIVE impact on your credit score if done in a short period of time?

• Paying your bills on-time

• Paying down balances on your credit card accounts

• Decreasing your utilization of credit

• Applying for multiple credit cards

What benefits do you receive by taking out a loan with a cosigner?

• You don’t get penalized for late payments

• You get a discount on future loans after this one is paid off

• You have a better chance of getting approved and getting a lower interest rate if the cosigner has good credit

• You automatically get the same credit score as the cosigner once the loan is paid off

How can your credit score impact your financial well-being?

• Only consumers with high scores are approved for credit

• Consumers with low scores get lower interest rates on loans than those with high scores

• Your credit score can determine whether you are approved for a loan and what the interest rate on that loan will be

• It generally has no impact on your financial situation

If you are having trouble making auto loan payments and are following a tight budget, which recommendation below represents the WORST advice?

• Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control

• Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help

• Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms

• Explore whether a free or non-profit credit counseling service could help