Credit Decisions Challenge

This expanded version combines both parts of the Credit Decisions Challenge into one randomized set of 40 realistic scenarios. Choose the best answer for each situation. 1. You notice an automatic payment for a subscription you no longer use. What’s the best response?

• Cancel the subscription immediately.

• Ignore it — it’s a small charge.

• Report it as fraud.

• Wait for the company to refund you.

Answer explanation

Canceling the subscription immediately is the best response, as it prevents further charges and allows you to stop paying for a service you no longer use.

You're offered a loan with a 9% interest rate and another with a 14% rate. What's the best choice?

• The 14% one, since approval is easier.

• The 9% one, to save on interest over time.

• The 14% one, since payments start later.

• Either — interest doesn’t matter much.

Answer explanation

Choosing the 9% loan is best as it saves you more on interest over time compared to the 14% loan. Lower interest rates reduce the total amount you will pay back.

You owe $300 on a store card and stop opening their letters. What's smart?

• Call and set up a payment plan.

• Ignore them — they'll stop contacting you.

• Dispute it even though you owe it.

• Wait until they send it to collections.

Answer explanation

Calling to set up a payment plan is smart because it shows responsibility and can help avoid further penalties or damage to your credit. Ignoring the debt can lead to more serious consequences.

Your credit utilization ratio is 80%. What does that mean?

• You’re using most of your available credit, which may hurt your score.

• You’re doing great — it shows activity.

• You have a high income compared to your debt.

• You’ve paid off 80% of your balance.

Answer explanation

A credit utilization ratio of 80% means you are using a large portion of your available credit. This high usage can negatively impact your credit score, as it suggests you may be over-relying on credit.

A debt collector contacts you about an old unpaid account. What should you do?

• Verify the debt and set up payment if valid.

• Ignore them — it’ll fall off eventually.

• Give them your debit card immediately.

• Argue and hang up quickly.

Answer explanation

When contacted by a debt collector, it's important to verify the debt first. If it's valid, setting up a payment plan can help you manage the debt responsibly, rather than ignoring it or making hasty decisions.

You get a secured credit card with a $200 deposit. What’s the goal of this card?

• To use it like a debit card.

• To build credit safely through on-time payments.

• To borrow money from the bank directly.

• To spend the deposit as cash.

Answer explanation

The goal of a secured credit card is to build credit safely through on-time payments. The $200 deposit acts as collateral, allowing you to establish a positive credit history without the risk of overspending.

You’re about to move apartments. How can you keep your credit safe?

• Update your billing address with lenders.

• Ignore your mail until you settle in.

• Close all open accounts temporarily.

• Apply for several new cards to get a fresh start.

Answer explanation

Updating your billing address with lenders ensures that your credit accounts are linked to your new address, helping to maintain your credit score and avoid missed payments. Ignoring mail or closing accounts can harm your credit.

You get a call claiming you’ve won a free vacation if you share your credit info. What’s wise?

• Hang up — it’s likely a scam.

• Share only your last four digits.

• Ask for a call-back number and call later.

• Give your details since it’s free.

Answer explanation

Hang up — it’s likely a scam. Legitimate companies do not ask for sensitive information like credit details over the phone, especially for a free vacation. Protect your personal information.

You pay your phone bill on time every month. What’s the effect?

• Helps build your credit if reported to bureaus.

• Hurts your credit since it’s a small bill.

• No impact unless you use a credit card.

• Can only hurt if you pay late.

Answer explanation

Paying your phone bill on time can help build your credit score if the payments are reported to credit bureaus, as timely payments demonstrate responsible financial behavior.

You get a call offering to 'fix your credit score' for a fee. What should you do?

• Pay the fee — it's worth it to boost your score.

• Ignore it — you can improve credit for free.

• Give your credit card to pay quickly.

• Ask them to email your new score.

Answer explanation

Ignoring the call is the best choice because you can improve your credit score for free through responsible financial habits, such as paying bills on time and reducing debt, without incurring unnecessary fees.