Managing and Types of Credit Mid Unit Test

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

Heather realized she had taken on too much debt, which 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:

• 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 while paying off her debt

Which of the following statements about credit scores does this bar graph support?

• Credit scores tend to drop as you grow older because you are more likely to miss a payment at some point.

• It is more difficult for young people to borrow because they have less payment history for a lender to rely upon.

• When young people borrow, they are likely to have lower interest rates because their credit scores are lower.

• It is easier for young people to get loans at lower interest rates because they are likely to have never been late with a payment.

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

• Cancel his credit cards

• Make on-time payments

• Get a car loan

• Check his credit score

Melvin is 19 years old and wants to begin establishing a credit history. Which action should 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

Frank and Jasmere are each shopping for a new car for themselves. Each will need a $20,000 loan to repay over five years. Frank has a credit score of 730, and Jasmere has a score of 600. Which of the following statements is TRUE?

• Over the five-year period, Jasmere and Frank will pay the same amount for the car loan.

• Frank's monthly payment on the auto loan will be about $100 more than Jasmere's payment.

• Jasmere's monthly payment on the loan will be about $100 more than Frank's payment.

• Lenders are not allowed to charge people different interest rates based on their credit scores.

You have a credit card that you use regularly for small purchases to improve 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 and don't ever use it

Who tracks all of your credit information?

• Credit reporting agencies (Equifax, Experian, and TransUnion)

• Federal government

• Consumer Financial Protection Bureau (CFPB)

• Lenders

Kai has just received a secured credit card. The amount Kai can charge to this card is limited by...

• Kai's credit score

• The amount of money Kai deposits into an account as collateral

• The total amount of money across all Kai's bank accounts

• How long Kai has had an account with the bank

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