Module 4 Review

The granting of money or something else of value for the promise of future payment is called ______

• debit

• credit

• IOU

• generousity

Collateral is best defined as ______________.

• property required by lenders and offered by borrowers to guarantee payment on a loan.

• the taxable portion of interest paid on a loan.

• the information supplied by a borrower to a potential lender to qualify for a loan.

• the same thing as APR (annual percentage rate)

A credit report does not include the consumer's ________

• birth date and social security number.

• total number of open credit accounts.

• race, age, or ethnicity.

• current and past addresses.

Answer explanation

Age, ethnicity, and gender are NOT legal factors for determining credit eligibility.

Most of the information collected by the Big Three credit bureaus comes from _____.

• mortgage and auto lenders.

• former employers.

• general credit cards and other sources.

• US government census data.

Answer explanation

Credit card activity provides a wealth of information used by credit bureaus. This is good and bad depending on how responsible you are with your credit habits.

The most commonly (widely) used rating of a consumer's credit worthiness is ______.

• FICO score.

• GIPA score.

• PGA score.

• Triple Axel score.

Answer explanation

FICO is the most commonly used scoring model to determine credit eligibility and worthiness for a potential borrower. FICO scores range from 300 to 850.

The Truth in Lending Act _________.

• provides borrowers with directions for filling out payday loan applications.

• requires lenders to disclose the terms of a loan before consumers enter in an agreement.

• gives payday lenders protection against bad borrowers.

• allows big banks to raise interest rates without notice due to changing economic conditions.

Answer explanation

The Truth in Lending Act (TILA) protects you against inaccurate and unfair credit billing and credit card practices. It requires lenders to provide you with loan cost information so that you can comparison shop for certain types of loans.

A mortgage is a specific type of loan to purchase a ________.

• car

• home

• business

• rocket ship

Which type of debt has the highest consumer debt balance?

• credit cards

• auto loans

• student loans

• mortgages

Answer explanation

70% of consumer debt in America comes from mortgages with 44 million households having at least one mortgage on their homes.

All of the following are criteria to be eligible for EXCEPT

• age

• citizenship

• specific job or occupation

• your credit score (FICO)

Answer explanation

Occupation is not reviewed as part of a credit card application. Proving consistent income can be so employer information might be asked. However, eligibility and terms are not determined based on what you do for a living.

A type of loan that involves fixed payments and a lump sum borrowed is a(n) _______.

• installment loan.

• revolving line of credit.

• evolving line of credit.

• subsidized loan.