Understanding Credit Types

Jamie, also known as Miss Be Hopeful, explains the five types of credit: revolving, installment, service, secured, and unsecured. She emphasizes the importance of having a mix of these credit types to improve credit scores. Revolving credit, like credit cards, allows reuse of funds. Installment credit involves fixed payments, such as loans. Service credit is gained through regular bill payments. Secured credit requires collateral, while unsecured credit does not. Jamie encourages viewers to diversify their credit types for better financial health.

What is the main purpose of understanding different types of credit?

• To eliminate the need for loans

• To increase spending without consequences

• To improve financial literacy and manage credit effectively

• To avoid using credit altogether

Which of the following is an example of revolving credit?

• Mortgage

• Credit card

• Student loan

• Utility bill

What is a key feature of revolving credit?

• It must be paid off in full each month

• It is only available for large purchases

• It allows reuse of credit after repayment

• It has a fixed repayment schedule

Which type of credit involves borrowing a fixed amount and repaying it over time?

• Installment credit

• Unsecured credit

• Service credit

• Revolving credit

How does installment credit benefit your credit score?

• By increasing your available credit

• By reducing your overall debt

• By eliminating interest charges

• By showing a history of consistent payments

What is an example of service credit?

• Utility bill

• Credit card

• Personal loan

• Car loan

What is the main difference between secured and unsecured credit?

• Unsecured credit is only for personal use

• Secured credit is only for businesses

• Unsecured credit has lower interest rates

• Secured credit requires collateral, unsecured does not

Which of the following is a secured type of credit?

• Home mortgage

• Credit card

• Utility bill

• Personal loan

What happens if you default on a secured loan?

• You lose the collateral

• Your credit score increases

• You receive a bonus

• Nothing happens

Why is it important to have a mix of different types of credit?

• To confuse creditors

• To maximize credit score potential

• To eliminate debt

• To avoid paying interest