PF Unit 4&5 Credit

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.

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.

Who tracks all of your credit information?

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

• Federal government

• Consumer Financial Protection Bureau (CFPB)

• Lenders

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

Madison is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?

• All 3 cards are completely different
• Debit cards and prepaid debit cards are the same
• Debit cards and credit cards are the same
• All 3 cards are completely the same

Which of these credit payback strategies would lead to the highest overall cost?

• Paying off your credit card bill in full every month

• Paying 20% of your credit card balance every month on time

• Making the minimum payment (3% of your credit card balance) every month on time

• Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

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

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

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

• 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.