9. Heather realized she has taken out too much debt and it has started to negatively impact her ability to budget. She has decided to pay off this debt in full as soon as possible. All of the following would be beneficial strategies EXCEPT…

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

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

10. What is the general timeline to establish your first credit score?

Six months after you first actively use your credit

As soon as you apply for a credit card or loan

Once you pay all of your credit balances in full

11. Which best describes the Debt Snowball method for paying off debt?

Make the monthly minimum payments on all your debts, and then put any extra cash toward the debt with the lowest balance

Only make payments on your smallest debt first, then move on to your second smallest debt, and so on

Once your debt "snowballs" out of control, hire a certified credit counselor to help get your finances back on track

Make the monthly minimum payments on all your debts, and then put any extra cash toward the debt with the highest balance

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

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

Only consumers with high scores are approved for credit

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

It generally has no impact on your financial situation

14. If you are having trouble making auto loan payments and are really 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

15. Reading through a credit card’s Schumer Box, you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?

Your APR will be within that range, depending on the strength of your credit history

When given a range of APRs like this, you can assume most cardholders pay the lowest rate listed

In this case, you want the highest APR in the range because you’ll earn more

The APR on credit cards is usually fixed, so it won't be adjusted as long as you are a cardholder

16. As a young adult, all of the following are good strategies for building credit, EXCEPT:

Open a credit card, with your parent or guardian as a cosigner

Become an authorized user on a credit card used by your parent or guardian

Open and use a secured credit card

17. Jane needs a cosigner for her loan. Which person would be the best for her to ask to be her cosigner?

Her sister, who shows her she has a credit score of 735

Her cousin, who has several fancy cars and must be rich

Her grandfather, who lives on a tight budget

Her neighbor, who says sharing the loan will allow him to remodel his garage at the same time

18. How does the interest rate on a loan compare for someone with excellent credit compared to someone with poor credit?

Interest rates are lower for someone with excellent credit

Interest rates are the same regardless of credit score

Interest rates are higher for someone with excellent credit

Interest is not charged for someone with excellent credit

19.It is best to avoid these in order to improve your payment history…

Credit cards without a rewards program

Banks that only offer one type of credit card

Payments greater than the minimum required

20. It’s beneficial to use some of your available credit because…

It shows you can responsibly use credit and builds your credit history

The interest you’ll be charged goes up for every month you don’t use any credit

Banks require you to use some form of credit in order to have an account with them

Employers are less likely to hire you if you don’t have a balance on your credit card

21. In general, why do so many different types of companies check your credit report?

They want to make sure you’re likely to make consistent and timely payments

They’re legally required to do so by the Securities and Exchange Commission (SEC)

To determine the price of the product or service they’re selling you

Doing business with someone with a low credit score will also lower their credit score

22. What should you do if you find errors in your credit report?

Contact the credit reporting agency or the company that provided the information

Close the affected credit account(s)

Call the police to notify them of potential fraud

23.If a person with multiple sources of debt has a goal of eliminating one or more of them in as little time as possible, which debt repayment strategy would be best?

Stopping payments on all debts but one so you can pay that one off faster

26. Each of the following people has $5000 in debt. Which debt is most worthwhile?

It’s impossible to tell, because we don’t know how much they each valued the spending, how much it impacted their lives, or how easily they can repay the debt

Phil, who spent mostly on GoFundMe campaigns for people he saw on social media

Tyree, who took out a loan for an old used car so he can drive to and from campus

JJ, who used a credit card to pay his daily expenses while he was out of a job

27. Felix opens a credit card with no annual fee, so he assumes that using the credit card regularly will be absolutely free for the next two years while he finishes grad school. Why is his assumption incorrect?

Unless he pays the whole bill every month, he will pay interest according to his APR

He will automatically pay penalty fees if he uses his credit card for more than 3 consecutive months

If his grace period is any longer than 10 days, he will have to pay fees

He will need to pay a separate student fee because he is still in grad school

28. Which statement best describes a Schumer box?

A standardized way of presenting the key terms of your credit card agreement

The final calculation of how much you owe on your credit card bill each month

A legal document stating that you’re behind on your credit card payments

The outstanding balance on your credit card once you’ve made your recent payment

30. Which of these actions would most likely decrease a person’s net worth for at least the next 6 months?

Use a loan to buy a brand new car

Work 10 hours of overtime each week and put all extra earnings into a savings account

Work 10 hours of overtime each week and use all extra earnings to pay down student loan debt

Open 3 new credit cards but don’t spend any money on them

Credit 2024

Authored by Elisabeth Oliver

Other

Professional Development

Used 6+ times

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30 questions

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MULTIPLE CHOICE QUESTION

30 sec • 4 pts

1. Which word represents the total cost of the item you are purchasing on credit minus any down payment you make upfront?

Principal

Term

Interest rate

APR

MULTIPLE CHOICE QUESTION

30 sec • 3 pts

2. Which statement is true of both debit AND credit cards?

Both can trap you in an endless cycle of debt if you’re not careful

Both allow you to make purchases in a store or online

Both typically have interest rates between 10-30%

Both require you to pay a minimum monthly payment when your bill arrives

MULTIPLE CHOICE QUESTION

30 sec • 4 pts

3. If you buy a $1000 bicycle, which credit card payoff strategy will result in your paying the LEAST total amount?

Pay the minimum monthly payment

Pay $100 per month for 10 months

Pay $250 per month until it’s paid off

Don’t make any payments until you have the full $1000 saved, regardless of how long that takes

MULTIPLE CHOICE QUESTION

30 sec • 3 pts

4.Paying more than the minimum payment (or paying your balance in full) is beneficial because…

It lowers your interest rate

The lender can’t penalize you for future late payments

You get a discount on future purchases made with credit

You pay less interest overall

MULTIPLE CHOICE QUESTION

30 sec • 4 pts

5.All of the following appear on your credit report EXCEPT…

Your checking account balance

Student loan payment history

Balance owed on a car loan

Number of active credit accounts

MULTIPLE CHOICE QUESTION

30 sec • 3 pts

6.Which of the following categories make up most of your credit score?

Number of recent hard inquiries

Average length of your credit history

Number of active credit accounts

Payment history and credit utilization

MULTIPLE CHOICE QUESTION

30 sec • 4 pts

7. All of the following purchases can be impacted by your credit report EXCEPT…

Getting your own cell phone plan

Leasing an apartment

Applying for a mortgage to buy a house

Buying a TV with cash

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Credit 2024

1. Which word represents the total cost of the item you are purchasing on credit minus any down payment you make upfront?

2. Which statement is true of both debit AND credit cards?

3. If you buy a $1000 bicycle, which credit card payoff strategy will result in your paying the LEAST total amount?

4.Paying more than the minimum payment (or paying your balance in full) is beneficial because…

5.All of the following appear on your credit report EXCEPT…

6.Which of the following categories make up most of your credit score?

7. All of the following purchases can be impacted by your credit report EXCEPT…

8. Which of the following is most likely to represent a fixed rate, secured debt?

9. Heather realized she has taken out too much debt and it has started to negatively impact her ability to budget. She has decided to pay off this debt in full as soon as possible. All of the following would be beneficial strategies EXCEPT…

10. What is the general timeline to establish your first credit score?

Access all questions and much more by creating a free account

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