Managing Credit Review

1. Benjamin confides in Lily and Olivia that he has a low credit score after a financial setback. What is the single best way for Benjamin to improve his score?

• Cancel his credit cards

• Make on-time payments

• Get a car loan

• Check his credit score

Answer explanation

The single best way for your friend to improve his credit score is to make on-time payments. This demonstrates responsible financial behavior and can positively impact his credit history.

1. James, Hannah, and Arjun are discussing about credit scores. According to them, what are the two most important factors in calculating your credit score?

• Payment history and type of account

• Amounts owed and length of credit history

• Payment history and amounts owed

• Length of credit history and new credit inquiries

Answer explanation

The two most important factors in calculating your credit score are payment history and amounts owed.

1. Arjun is reviewing his credit report. Which of the following would NOT appear on Arjun's credit report?

• 1. The salary from his current job at Mason's company

• Payment history of the car loan he took for his daughter, Isla

• Credit card payment history

• Student loan activity from his college days

Answer explanation

The salary of your current job would not appear on a credit report. Only financial activities like payment history of loans and credit cards, and student loan activity are included.

1. Evelyn, Mason, and James are college students. Which of the following actions will help them start developing a credit history before they graduate?

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

• 1. Make small payments on their student loans while in college, even though they are not required to be paid back until they leave

• 1. Any time they borrow money from their parents, friends, or family, be sure to pay it back promptly

• 1. Be sure to keep a bit of their paycheck in a savings account instead of a checking account

Answer explanation

Making small payments on your student loans while in college helps you begin developing a credit history before you graduate.

1. Zoe is planning to buy a new car and is considering taking a loan. How can her credit score impact this financial situation?

• 1. Only consumers like Zoe with high scores can borrow and those with low scores cannot

• 1. Consumers like Zoe with low scores get lower interest rates on loans than those with high scores

• 1. Zoe's credit score can determine whether she is approved for the car loan and what the interest rate on that loan will be

• 1. It generally has no impact on Zoe's financial situation

Answer explanation

Your credit score determines loan approval and interest rates, impacting your financial situation.

1. Abigail is applying for a federal student loan. Which of the following is least likely to check her credit score?

• Credit card companies

• Auto loan lenders

• Landlords

• Federal student loan office

Answer explanation

The Federal student loan office does not check your credit score. Credit card companies, auto loan lenders, and landlords are likely to check your credit score.

1. Liam, Kai, and William are discussing the best way to use a credit card to boost their credit scores. They come up with different strategies. Which strategy will have the greatest impact?

• 1. Liam suggests spending up to the full credit limit on the card and paying off the bill in full every month on time

• 1. Kai suggests not using more than 30% of the credit limit on the card and paying it off in full every month by the due date

• 1. William suggests making the minimum payment required on the credit card every month by the due date

• 1. They also consider the option of putting the credit card in a drawer and not using it at all

Answer explanation

The best way to boost your credit score is by not using more than 30% of the credit limit on your card and paying it off in full every month by the due date.

Ava forgets to pay her credit card bill one month. Mia wonders how long will that payment information show up on Ava's credit report?

• Once Ava makes the payment, it will disappear

• One year

• Seven years

• Ten years

Answer explanation

The payment information will show up on your credit report for seven years.

1. Samuel is applying for a loan and he is curious to know who tracks all of his credit information. Can you help him?

• 1. Federal government

• 1. Companies named Equifax, Experian and TransUnion

• 1. Consumer Financial Protection Board (CFPB)

• Lenders

Answer explanation

The correct answer is 'Companies named Equifax, Experian and TransUnion'. These companies track all of your credit information.

1. Noah, a lender, is checking Jason's credit score for an auto loan. He would likely notice that...

• 1. Jason paid off a car loan after making every payment for 4 years

• 1. Jason's savings account has more than $3000 in it

• 1. Jason stopped paying his credit card for 3 months 9 years ago

• 1. The credit scores of Jason's family, including his parents and his wife if he is married

Answer explanation

The lender would notice that Jason paid off a car loan after making every payment for 4 years, which indicates responsible financial behavior.