Understanding Credit and Loans

Why do banks want to know the financial history of their loan customers?

• To understand the financial risk of giving a consumer a line of credit.

• To find out their favorite stores.

• To see their family history.

• To know their travel plans.

I'm your bank. You want a loan. Why should I loan you money?

• I am creditworthy; I pay my bills on time; I have little debt.

• I like to shop a lot.

• I have many friends.

• I travel frequently.

A credit report contains many pieces of personal information about a consumer. Name two.

• Previous addresses, Social Security number.

• Favorite movies, favorite foods.

• Pet names, favorite colors.

• Vacation spots, hobbies.

You are busy with finals and forgot to pay your credit card bill. You are charged $100 in late fees. This will likely lower your (fill in the blank).

• Credit score.

• Height.

• Age.

• Shoe size.

A credit score is defined as:

• A standardized measurement of a person’s potential to repay a debt.

• A list of favorite songs.

• A measure of how many friends you have.

• A record of your travel history.

Name one of the three nationwide credit reporting agencies.

• Equifax.

• Google.

• Facebook.

• Amazon.

What does a consumer reporting agency do?

• It keeps records of consumers’ credit history.

• It plans vacations.

• It organizes parties.

• It writes novels.

You pay your bills on time. Is this a smart move?

• Yes. It shows lenders you can pay off your debts.

• No. It wastes time.

• No. It makes you lose money.

• Yes. It helps you get more bills.

Your credit score is 699. According to the FICO credit score system, is this a good or bad credit score?

• Good.

• Bad.

• Excellent.

• Poor.

Your available credit is $1,000, but you keep your debt to $200. How does this help you build a positive credit history?

• When you spend less than your credit limit, it reflects positively on your spending habits.

• It makes you spend more money.

• It lowers your credit score.

• It increases your debt.