Using Credit

Lucia doesn't have any credit cards, current loans, or debt.  Given this information, it is likely that Lucia's FICO score is high.

• True

• False

Which of the following will not help you establish a good credit history?

• Paying your phone bill on time

• Financing a car and making payments on time

• Making as many purchases as possible with cash

• Never exceeding your credit limit on your credit card

For creating credit scores, credit bureaus rely on a model created by the Fair Isaac Corporation.

• True

• False

Credit scores in the 500-600 range will result in

• lower interest rates.

• higher interest rates.

• automatic acceptance of your credit application.

• preferential treatment of your application.

Which is NOT an advantage of credit?

• Emergency Resources

• Hedge Against Inflation

• Convenience

• Decreases Consumption

Which of the following credit scenarios will lead to the best deals (i.e., a case where the borrower ends up paying back less money)?

• Marshall is offered a credit card with an introductory 0% APR for 12 months and then a rate of 17% thereafter.  He borrows $2000 and pays it back in 6 months.

• Andrea is offered a credit card with 14% APR.  She spends $2000 on the credit card, and pays it back in 12 months.

• Marco is offered a credit card with a 8% APR.  He spends $3000 and pays it back in exactly two years.

• Tony is offered a credit card with an APR of 15% and an annual fee of $35.  He spends $1700 and pays it back in 18 months.

Leon has a FICO score of 590, and Nicole has a FICO score of 700.  Which of these potential borrowers will be seen as the better risk to a lender who is considering whether to lend money or not?

• Leon

• Nicole

• Both would be considered to be good potential borrowers

• Neither would be viewed as acceptable borrowers

A credit limit is the maximum amount of money that a lender will allow a borrower to use via a loan or credit card.

• True

• False

Which of the following is not a kind of information provided on a credit report?

• prior bankruptcies

• repayment history for each previous loan or credit card

• educational history

• savings history

Making regular deposits into a savings account does not enhance one's credit score.

• True

• False