Managing Credit - Unit 5

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

Marco realized he has taken out too much debt and it has started to negatively impact his ability to budget. He 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 his income

• Making more than the minimum required payment on her debt
• Applying for another credit card to use in case he runs out of cash paying off her debt

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

Carmine and Lisa are each shopping for a new car for themselves. Each will need a $20,000 loan that they will pay back over a five year period. Carmine has a credit score of 750 and Lisa has a score of 610. Which of the following statements is TRUE?

• Over the five year period, Lisa and Carmine will pay the same amount for the car loan

• Carmine's monthly payment on the auto loan will be about $100 more than Lisa's payment

• Lisa's monthly payment on the loan will be about $100 more than Carmine's payment

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

What strategy should you use to pay off multiple sources of debt if you want to pay the lowest amount of interest over time?

• Snowball method
• Make minimum payments
• High rate method
• Consolidate multiple debts into one new loan

Who tracks all of your credit information?

• Credit reporting agencies (Equifax, Experian and TransUnion)
• Federal government
• Consumer Financial Protection Board (CFPB)
• Lenders

Which of the following things should you have ready when contacting a credit reporting agency to report an error on your credit report?

• Your preferred payment method to pay for fixing the error
• A list of all of your financial accounts and balances
• An explanation of the mistake and any evidence you have supporting your claim
• References from a non-family member vouching for your creditworthiness

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

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

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

Which of these represents a potential consequence of neglecting to pay your federal student loans?

• Wages or tax refunds can be garnished
• Passport revocation
• Driver’s license suspension
• Termination from your job