Credit Management Flashcard - v2

Front

Shya is applying for a loan to buy a new car. The bank uses a system to evaluate her application. What is this system?

Back

A statistical method used by lenders to assess the creditworthiness of potential borrowers.

Answer explanation

The correct choice is a statistical method used by lenders to assess the creditworthiness of potential borrowers, as this directly relates to evaluating loan applications like Shya's for a car.

Front

What is credit utilization?

Back

The ratio of your credit card balance to your credit limit.

Answer explanation

Credit utilization is the ratio of your credit card balance to your credit limit.

Front

Isaiah is applying for a mortgage and is concerned about his credit score. Which of the following factors can affect Isaiah's credit score? Income level, employment history, and age; Number of social media followers, number of pets, and favorite color; Height, weight, and shoe size; Payment history, credit utilization, length of credit history, types of credit used, and new credit inquiries.

Back

Payment history, credit utilization, length of credit history, types of credit used, and new credit inquiries.

Answer explanation

The correct choice includes factors that directly impact credit scores, such as payment history and credit utilization. Other options list irrelevant personal traits or social metrics that do not affect credit scores.

Front

Who is correct about the credit utilization ratio: Brays (Below 30%), Duncan (Below 10%), Kaden (Above 50%), or Friend (Between 30% and 50%)?

Back

Brays (Below 30%)

Answer explanation

Brays is correct; a good credit utilization ratio is generally considered to be below 30%. This helps maintain a healthy credit score, while Duncan's suggestion of below 10% is overly strict.

Front

What is the purpose of Yarelyz's credit report when applying for a car loan?

Back

To provide the lender with information about Yarelyz's creditworthiness and ability to repay the loan.

Answer explanation

The credit report provides the lender with essential information about Yarelyz's creditworthiness, which helps assess her ability to repay the loan. This is crucial for making informed lending decisions.

Front

Angel has been approved for a new credit card. What is the credit limit on this card?

Back

The maximum amount of credit that the credit card company is willing to extend to Angel.

Answer explanation

The credit limit on Angel's new credit card refers to the maximum amount of credit that the credit card company is willing to extend to her, allowing her to make purchases up to that limit.

Front

What is the range of numbers that the bank will look at to determine Nichole's creditworthiness?

Back

A range of numbers that represents Nichole's credit score.

Answer explanation

The bank evaluates Nichole's creditworthiness primarily through her credit score, which is a numerical representation of her credit history and financial behavior. The other options are irrelevant to loan evaluation.

Front

What is the purpose of credit counseling?

Back

To help individuals like Seleena, Raul, and Aliyah manage their debt and improve their financial situation.

Answer explanation

The purpose of credit counseling is to help individuals like Seleena, Raul, and Aliyah manage their debt and improve their financial situation, making the first answer choice the correct one.