Understanding Credit and Loan Concepts

The video tutorial explains the challenges of obtaining credit without a credit history and offers strategies to build credit from scratch. It covers the importance of payment history and credit utilization, and discusses other factors affecting credit scores, such as credit history length, credit mix, and inquiries. The video also introduces credit builder loans and the concept of becoming an authorized user to improve credit scores. Finally, it highlights the impact of inquiries and new accounts on credit scores and emphasizes the importance of understanding credit reporting and scoring.

What is the main reason lenders might deny a loan to someone with no credit history?

• They have no information to assess the person's reliability.

• They think the person has too many loans already.

• They believe the person is not interested in borrowing.

• They assume the person has bad credit.

What is a revolving line of credit?

• A fixed loan with a set repayment schedule.

• A type of credit that doesn't affect your credit score.

• A credit line where payments depend on usage.

• A loan that must be paid in full each month.

Why might someone choose a secured credit card over an unsecured one?

• Secured cards offer higher credit limits.

• Secured cards are easier to obtain without credit history.

• Secured cards do not require a deposit.

• Secured cards have no spending limit.

What is the ideal credit utilization percentage to maintain?

• Above 70%

• Exactly 50%

• Below 30%

• Above 50%

Which factor is NOT considered when calculating a credit score?

• Inquiries and new accounts

• Number of credit cards owned

• Length of credit history

• Credit mix

What is a credit builder loan?

• A loan that requires no repayment.

• A loan that is only available to those with good credit.

• A loan that combines savings and credit building.

• A loan that is given directly to the borrower.

What does becoming an authorized user on someone else's credit account mean?

• You can use their credit line and it affects your credit report.

• You can only view the account activity.

• You are liable for any debts on the account.

• You take full responsibility for the account.

What is a potential risk for the person allowing you to become an authorized user on their credit account?

• They will have to pay your debts.

• Their credit score could be negatively impacted.

• They might lose access to their account.

• Their credit score might improve.

What happens to your credit score when you apply for multiple lines of credit in a short period?

• It takes a short-term hit.

• It becomes invalid.

• It remains unchanged.

• It improves significantly.

Why is understanding credit reporting and scoring important?

• It guarantees a high credit score.

• It is essential for building or rebuilding credit.

• It ensures you never need to borrow money.

• It helps you avoid all forms of debt.