Types of Credit Review

1. 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

2. 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…

• 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 paying off her debt

3. 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

5. 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

6. 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

7. What benefits do you receive by taking out a loan with a cosigner?

• You don’t get penalized for late payments
• You get a discount on future loans after this one is paid off
• You have a better chance of getting approved and getting a lower interest rate if the cosigner has good credit
• You automatically get the same credit score as the cosigner once the loan is paid off

8. Which response best completes the sentence "It's best to begin establishing credit when you're young because ________" ?

• Accessing credit only becomes more expensive as you get older
• Negative marks on your credit report go away faster for younger borrowers
• Credit scores are free for anyone under the age of 25
• You will likely need a credit history to rent your first apartment, finance your first car, or open an unsecured credit card

10. All of the following would show up on a credit report, EXCEPT...

• Salary of your current job
• Payment history of your car loan
• Credit card payment history
• Student loan activity

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

• A student loan
• A credit card
• A prepaid debit card
• An auto loan

12. Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?

• Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount
• The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly
• The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan
• Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash