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WorksheetsChp 8 Credit
Total questions: 35
Worksheet time: 35mins
Matching:
a numerical measure of a loan applicant’s creditworthiness at a particular point in time
credit score
a record of a person’s credit history
credit report
an organization that collects information about the financial and credit transactions of consumers
credit bureau
an individual’s credit and financial behavior over a period of years (7 years)
credit history
having the assets (capital), income (capacity), and willingness (character) to repay debt
creditworthiness
Which of the following is true regarding high-risk borrowers?
They often have high credit scores.
They are most likely to pay debts.
They will have more trouble getting credit.
They will likely have a lower interest rate.
If you have a poor credit rating, you could:
(select all correct answers)
Be turned down for a car loan
Be given a house
Have to pay a higher interest rate, meaning higher payments
Have to use easy-access credit for money
Which is the best example of closed-end credit?
car loan
store credit card
debit card
bank credit card
Comparing the APR (annual percentage rate) of different credit cards allows you to get the:
longest grace period
lowest late fees
lowest interest rate
lowest minimum payment
A preapproved maximum amount that an individual can borrow is called a(n) ______________________________.
line of credit
debt
a credit score
minimum payment
Which of the following is most likely to incur a fee from a credit lender?
paying off the full balance
closing the account
making a payment early
exceeding your credit limit
The grace period refers to the
time taken to process a credit card payment
time for paying an account without an interest charge
time allowed to notify the creditor of a billing error
time used for calculating interest
What is the difference between secured and unsecured debt?
The main difference between secured and unsecured loans is whether the loan is backed by collateral. Secured loans do not use collateral, while unsecured loans do.
The main difference between secured and unsecured loans is whether the loan is backed by collateral. Secured loans use collateral, while unsecured loans do not.
The main difference between secured and unsecured loans is if it is for a specific purpose, unsecured debts are only for specific purchases.
The main difference between secured and unsecured loans is if it is for a specific purpose, secured debts are only for specific purchases.
What is an advantage of using a credit card?
It will not affect your credit score or credit history
Since it is tied directly to your checking account, it prevents you from spending money you do not have
If you need to carry a balance, the interest rates are generally quite low (less than 5%)
You can make an emergency purchase that you otherwise don’t have the money to pay for right now
All are good ways to build credit history except:
auto loan
establish a steady work history
apply for a store credit card and pall all bills on time
using a debit card
You have a credit card and want to know the best way to use it to boost your credit score. Which step will have the greatest impact?
Not using more than 30% of the credit limit on your card and paying it off in full
every month by the due date
Spend up to the full credit limit on your card and pay off the bill in full every month
Make the minimum payment required on your credit card every month by the due
date
Put the credit card in a drawer and don't ever use it
Which of the following could have a NEGATIVE impact on your credit score?
Paying your bills on-time
Paying down balances on your credit
card accounts
Decreasing your utilization of credit
Applying for multiple credit cards in a
short period of time (e.g., a week)
Choose the three factors that impact the amount of interest paid for credit.
interest rate
credit score
amount of credit used
length of repayment period
Matching:
an agreement in which one party lends money to another party with the understanding that payment will be made at a later date
credit
a loan, for a set amount and for a specific purpose, that is repaid with interest by a specified date or according to schedule
closed-end credit
an agreement that allows the borrower to use up to a certain credit limit, over a period of time
open-end credit
credit granted based only on a signed credit agreement with no collateral
unsecured credit
Credit that requires collateral
secured credit
Select the statement below that accurately describes a characteristic of a credit card.
You owe the same payment every month
You must have money deposited into a checking account to use the credit card for purchases
Making full payments on-time every month is the only way to avoid interest charges
They do not charge interest
An excellent credit score will help with which aspect of car financing?
Bargaining for a great sales price
Receiving a large down payment
Qualifying for a low interest rate
Having a wide selection of term lengths
As a young adult, all of the following are good strategies for building credit, EXCEPT:
Open a credit card, with your parent or guardian as a cosigner
Take out a payday loan
Become an authorized user on a credit card used by your parent or guardian
Open and use a secured credit card
Why are payday loans so much easier to qualify for than traditional bank loans?
Payday loans are only used by affluent households, and the banks know they have enough money to cover them
Payday loans are just another word for direct deposit, and almost all employers offer their employees direct deposit instead of a paper paycheck
Payday loans require proof of employment or other regular income but not a credit check or good credit score
Payday loans are typically for such small dollar amounts that no one cares if you repay them or not
If you are having trouble making loan or credit card payments, which recommendation below represents the LEAST useful piece of advice?
Find an extra source of income by taking a second job, working longer hours, asking for a raise, etc
Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control
Call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms
Reduce spending in some other area of your budget so you can direct more funds toward debt payments
Below are the factors that impact your credit score.
Select the TWO factors that have the biggest impact on your credit score.
Credit Mix
Amounts owed (Debt)
Length of Credit History
New Credit Accounts
Payment History
Why do potential lenders frequently request to see your credit report before allowing you to borrow money?
It allows them to see exactly what you purchase on a regular basis, so they can assess your lifestyle
It's the only way they can legally see how much you have in your bank accounts
It allows them to assess you by reviewing where you went to college, where you work, and how much you've paid, so far, in taxes
It allows them to assess your creditworthiness, by how much current debt you have and how responsible you've been in making payments on existing debt
Matching:
a preapproved maximum amount that an individual can borrow
line of credit
a legally binding agreement between the borrower and the lender
contract
the time between the billing date and the start of interest charges
grace period
shows all credit charges for the month, and additional credit usage information
credit card statement
a required summary of a credit card's rates and fees that is in the credit cards agreement.
Schumer Box
Match the following
The amount of money borrowed.
principal
Portion of the purchase price paid up front.
down payment
Property that a borrower promises to give up in the event he or she can no longer repay the loan.
collateral
The smallest amount you can pay on a credit card account without paying a late fee or impacting your credit score.
minimum payment
Total amount paid by a borrower to a lender for the use of credit.
finance charge
A (a) is the party extending credit, or the lender.
The (b) is the party receiving credit, or the borrower.
All of the following would show up on a credit report, EXCEPT...
Salary of your current job
Payment history of your car loan
Credit card payment history
Student loan activity
Your friend confides in you that he has a low credit score. What is the single best way for
him to improve his score?
Cancel his credit cards
Make on-time payments
Get a car loan
Check his credit score
Who tracks all of your credit information?
Credit reporting agencies (Equifax, Experian and TransUnion)
Federal government
Consumer Financial Protection Board (CFPB)
Lenders
Which response best completes the sentence "It's best to begin establishing credit when
you're young because ________?"
Accessing credit only becomes more expensive as you get older
Negative marks on your credit report go away faster for younger borrowers
Credit scores are free for anyone under the age of 25
You will likely need a credit history to rent your first apartment, finance your first car,
or open an credit card
How can your credit score impact your financial well-being?
Only consumers with high scores are approved for credit
Consumers with low scores get lower interest rates on loans than those with high
scores
Your credit score can determine whether you are approved for a loan and what the
interest rate on that loan will be
It generally has no impact on your financial situation
Which of these credit scores would give you the HIGHEST interest payment?
400
600
750
800
Matching:
a short-term, high-interest loan that usually must be repaid on the borrower’s next payday
payday loan
a secured, short-term loan made using a borrower’s vehicle as collateral
title loan
a loan against the available credit on an individual’s credit card account
cash advance
businesses that give customers high-interest loans with personal property, such as jewelry, held as collateral
pawn shops
credit cards offered to people who have a poor credit history
subprime credit card
Organize these options into the right categories
auto loan
home mortgage
student loan
credit card
overdraft protection
line of credit
What is the primary benefit of maintaining a high credit score?
Guaranteed approval for any loan application
Automatic increase in credit limits
Ability to secure loans with lower interest rates
Access to exclusive credit cards with high fees
What is a potential consequence of missing a credit card payment?
Your credit score may increase
Your credit limit will automatically increase
You will receive a reward from the credit card company
You may incur late fees and interest charges it may also lower your credit score
