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WorksheetsUnit 6: Managing Credit
Total questions: 50
Worksheet time: 25mins
Name
Class
Date
1.
Shira is trying to decide between getting a debit card, a prepaid debit card, and a credit card. Which statement is true?
a)
All 3 cards are completely different
b)
Debit cards and prepaid debit cards are the same
c)
Debit cards and credit cards are the same
d)
All 3 cards are completely the same
2.
The average APR for a payday loan is closest to …
a)
4%
b)
14%
c)
40%
d)
400%
3.
Which of the following statements comparing credit and debit cards is TRUE?
a)
Far more businesses accept credit cards than debit cards
b)
Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard
c)
Credit card companies provide you with a monthly statement, while debit cards do not
d)
With debit cards, you're spending your own money at point of sale, but with credit cards, you're getting a loan that you need to pay back later
4.
Which of the following is most likely to represent a fixed rate, secured debt?
a)
A student loan
b)
A credit card
c)
A prepaid debit card
d)
An auto loan
5.
Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?
a)
Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount
b)
The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly
c)
The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan
d)
Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash
6.
What are the two most important factors in calculating your credit score?
a)
Payment history and types of accounts
b)
Amounts owed and length of credit history
c)
Payment history and total debt
d)
Length of credit history and new credit inquiries
7.
Heather realized she has taken out too much debt and it has started to negatively impact her ability to budget. She has decided to pay off this debt in full as soon as possible. All of the following would be beneficial strategies EXCEPT…
a)
Reducing spending by canceling some of her streaming subscriptions
b)
Taking extra shifts at work to increase her income
c)
Making more than the minimum required payment on her debt
d)
Applying for another credit card to use in case she runs out of cash paying off her debt
8.
Which of the following statements about credit scores does this bar graph support?
a)
Credit scores tend to drop as you grow older because you are more likely to miss a payment at some point
b)
It is more difficult for young people to borrow because they have less payment history for a lender to rely upon
c)
When young people borrow, they are likely to have lower interest rates because their credit scores are lower
d)
It is easier for young people to get loans at lower interest rates because they are likely to have never been late with a payment
9.
All of the following would show up on a credit report EXCEPT...
a)
Salary of your current job
b)
Payment history of your car loan
c)
Credit card payment history
d)
Student loan activity
e)
10.
Which of the following methods of getting your credit score would involve paying a fee?
a)
Checking your credit card or loan statement
b)
Talking to a non-profit counselor
c)
Checking creditkarma.com
d)
Getting a score from myFICO.com
11.
Your friend confides in you that he has a low credit score. What is the single best way for him to improve his score?
a)
Cancel his credit cards
b)
Make on-time payments
c)
Get a car loan
d)
Check his credit score
12.
Melvin is 19 years old and wants to begin establishing a credit history. Which action should he take to meet that goal?
a)
Always say "credit" when asked "credit or debit?" at a store
b)
Ask his parents to cosign a credit card or add him as an authorized user on their credit card
c)
Any time he borrows money from a friend or family member, be sure to pay it back promptly
d)
Take out some private student loans, even though he doesn't need them because he has grants and scholarships
13.
Which of the following individuals or groups would be the LEAST likely to look at your credit score?
a)
Someone interviewing you for a job
b)
Credit card companies
c)
An insurance company reviewing your applicant for auto insurance
d)
A bank representative who is helping you open a savings account
14.
Frank and Jasmere are each shopping for a new car for themselves. Each will need a $20,000 loan that they will pay back over a five year period. Frank has a credit score of 730 and Jasmere has a score of 600. Which of the following statements is TRUE?
a)
Over the five year period, Jasmere and Frank will pay the same amount for the car loan
b)
Frank's monthly payment on the auto loan will be about $100 more than Jasmere's payment
c)
Jasmere's monthly payment on the loan will be about $100 more than Frank's payment
d)
Lenders are not allowed to charge people different interest rates based on their credit scores
15.
You have a credit card that you use regularly for small purchases with the goal of improving your credit score. Which strategy would have the GREATEST positive impact?
a)
Use less than 30% of the credit limit and pay it off in full every month by the due date
b)
Always carry a balance from month to month
c)
Regardless of how much your balance is, make the minimum payment required on your credit card every month by the due date
d)
Put the credit card in a drawer instead and don't ever use it
16.
What strategy should you use to pay off multiple sources of debt if you want to pay the lowest amount of interest over time?
a)
Snowball method
b)
Make minimum payments
c)
High rate method
d)
Consolidate multiple debts into one new loan
17.
Who tracks all of your credit information?
a)
Credit reporting agencies (Equifax, Experian and TransUnion)
b)
Federal government
c)
Consumer Financial Protection Board (CFPB)
d)
Lenders
18.
What is the general timeline to establish your first credit score?
a)
As soon as you apply for a credit card or loan
b)
Six months after you first actively use your credit
c)
Once you pay all of your credit balances in full
d)
Once you turn 18
19.
You find an error on your credit report: Your credit card account indicates that you are 60 days late on your payment but you have bank records indicating that you have always made on-time payments. What should you do FIRST?
a)
Contact the credit card company to have them fix it
b)
Contact the credit reporting agency
c)
Wait a few weeks to see if it gets resolved
d)
Call the police to report the possible identity theft
20.
Which of the following things should you have ready when contacting a credit reporting agency to report an error on your credit report?
a)
Your preferred payment method to pay for fixing the error
b)
A list of all of your financial accounts and balances
c)
An explanation of the mistake and any evidence you have supporting your claim
d)
References from a non-family member vouching for your creditworthiness
21.
Which of the following could have a NEGATIVE impact on your credit score if done in a short period of time?
a)
Paying your bills on-time
b)
Paying down balances on your credit card accounts
c)
Decreasing your utilization of credit
d)
Applying for multiple credit cards
22.
Which best describes the Debt Snowball method for paying off debt?
a)
Only make payments on your smallest debt first, then move on to your second smallest debt, and so on
b)
Once your debt "snowballs" out of control, hire a certified credit counselor to help get your finances back on track
c)
Make the monthly minimum payments on all your debts, and then put any extra cash toward the debt with the highest balance
d)
Make the monthly minimum payments on all your debts, and then put any extra cash toward the debt with the lowest balance
23.
Which of these represents a potential consequence of neglecting to pay your federal student loans?
a)
Wages or tax refunds can be garnished
b)
Passport revocation
c)
Driver’s license suspension
d)
Termination from your job
24.
What benefits do you receive by taking out a loan with a cosigner?
a)
You don’t get penalized for late payments
b)
You get a discount on future loans after this one is paid off
c)
You have a better chance of getting approved and getting a lower interest rate if the cosigner has good credit
d)
You automatically get the same credit score as the cosigner once the loan is paid off
25.
You're paying your credit card bill and your student loan payment each month, but you're falling behind on your auto loan payment. Which friend's advice could have a NEGATIVE impact on your credit score?
a)
Joanie says, "Call the auto lender and see if you can negotiate a lower monthly payment or some other deal."
b)
Debbie says, "Stop making the credit card payment for a few months until you're caught up on the auto loan."
c)
Angie says, "Pick up a second job for as long as it takes to accumulate enough money to make all your payments, even if it means losing time with friends and family."
d)
Betty says, "Cut down to a bare bones budget, where your necessities and your debt repayments take first priority. Cut everything non-essential."
26.
Which response best completes the sentence "It's best to begin establishing credit when you're young because ________" ?
a)
Accessing credit only becomes more expensive as you get older
b)
Negative marks on your credit report go away faster for younger borrowers
c)
Credit scores are free for anyone under the age of 25
d)
You will likely need a credit history to rent your first apartment, finance your first car, or open an unsecured credit card
27.
Review this partial credit report, and then choose the response below that accurately depicts the information on the report.
a)
The borrower paid a $30 fee in February 2015
b)
This borrower was never late with any of their credit payments
c)
This borrower's most recent payment was $30
d)
This borrower was 30 days late on their May 2015 payment
28.
The amount you can charge to a secured credit card is limited by…
a)
Your credit score
b)
The amount of money you deposit into an account as collateral
c)
The total amount of money across all your bank accounts
d)
How long you’ve had an account with the bank
29.
Which free credit report service is authorized by federal law but only accessible once per year?
a)
AnnualCreditReport.com
b)
Credit Karma
c)
Credit Wise
d)
Wallet Hub
30.
How can your credit score impact your financial well-being?
a)
Only consumers with high scores are approved for credit
b)
Consumers with low scores get lower interest rates on loans than those with high scores
c)
Your credit score can determine whether you are approved for a loan and what the interest rate on that loan will be
d)
It generally has no impact on your financial situation
31.
If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?
a)
Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help
b)
Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control
c)
Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms
d)
Explore whether a free or non-profit credit counseling service could help
32.
When loans are amortized, monthly payments are _______ , while the amount of your monthly payment applied to interest ________ and the amount of your monthly payment applied to the principal _______ over time.
a)
Constant, Increases, Increases
b)
Constant, Decreases, Increases
c)
Variable, Decreases, Increases
d)
Variable, Decreases, Decreases
33.
Which of the following is true about fixed and adjustable-rate mortgages?
a)
Fixed-rate mortgages have a constant payment every month, but an interest rate that increases throughout the term of the loan
b)
Fixed-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions
c)
Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions
d)
The two mortgages work the same way but are called different names depending if they come from a bank or a credit union
34.
Which of these credit payback strategies would lead to the HIGHEST overall cost?
a)
Paying off your credit card bill in full every month
b)
Paying 20% of your credit card balance every month on time
c)
Making the minimum payment (3% of your credit card balance) every month on time
d)
Making the minimum payment (3% of your credit card balance) every month with an occasional late payment
35.
Denise took out a payday loan for $300 in August. By February of the next year, she was able to pay back the loan, but she had spent a total of $750 doing so. What’s the most likely story of how this happened?
a)
The minimum monthly payment for payday loans is usually only $10 or $15, so a lot of interested accumulated
b)
Upfront, Denise knew there would be $450 of fees attached to the loan, but she took out the loan anyway
c)
Payday loans must be paid in full within two weeks, and if not, the only option is to renew the loan for a high penalty fee, which she did approximately 12 times
d)
Denise not only paid the $300 she owed, but she prepaid an extra $450 in case she needs another loan in upcoming months
36.
Taylor is about to go car shopping, and she has $5000 saved that she can use for a down payment while still having extra cash in her emergency fund. She expects the exact model car she’s looking for to cost $35,000. If her top priority is having the lowest monthly payments possible, which advice should she follow?
a)
Put in $0 for your down payment, and choose a loan with a short term length
b)
Put in $2500 for your down payment, and choose a loan with a short term length
c)
Put in $3500 for your down payment, and choose a loan with a long term length
d)
Put in $5000 for your down payment, and choose a loan with a long term length
37.
Reading through a credit card’s Schumer Box, you see the APR for a specific card is set at 9.99% - 23.99%. Which statement is true?
a)
When given a range of APRs like this, you can assume most cardholders pay the lowest rate listed
b)
Your APR will be within that range, depending on the strength of your credit history
c)
In this case, you want the highest APR in the range because you’ll earn more
d)
The APR on credit cards is usually fixed, so it won't be adjusted as long as you are a cardholder
38.
What is an advantage of using a credit card?
a)
It will not affect your credit score or credit history
b)
Since it is tied directly to your checking account, it prevents you from spending money you do not have
c)
If you need to carry a balance, the interest rates are generally quite low (less than 5%)
d)
You can make an emergency purchase that you otherwise don’t have the money to pay for right now
39.
Credit card disclosure: "Your due date is at least 25 days after the end of the billing cycle. We will not charge you interest on new purchases provided that you have paid your previous balance in full by the due date each month." Identify the true statement.
a)
If you make the minimum payment on your card within the 25 day period, the credit card company will not charge you interest
b)
If you pay your previous balance in full after the due date, the credit card company will not charge you interest
c)
25 days is an exceptionally long period without paying a credit card bill
d)
The 25 days after the end of the billing cycle is referred to as the grace period
40.
A loan with a shorter term length will have __________ monthly payments, and you will pay __________ in total interest.
a)
higher, less
b)
higher, more
c)
lower, less
d)
lower, more
41.
Select the statement below that accurately describes a characteristic of a credit card.
a)
You owe the same payment every month
b)
You must have money deposited into a checking account to use the credit card for purchases
c)
Making full payments on-time every month is the only way to avoid interest charges
d)
They do not charge interest
42.
Which of the following statements is CORRECT about secured loans?
a)
They are a good choice to use for student loans
b)
If the borrower does not make payments, the lender can repossess the item
c)
In the event of default, the borrower loses nothing except for the down payment
d)
They usually have higher interest rates as compared with unsecured loans
43.
An excellent credit score will help with which aspect of car financing?
a)
Bargaining for a great sales price
b)
Receiving a large down payment
c)
Qualifying for a low interest rate
d)
Having a wide selection of term lengths
44.
As a young adult, all of the following are good strategies for building credit, EXCEPT:
a)
Open a credit card, with your parent or guardian as a cosigner
b)
Take out a payday loan
c)
Become an authorized user on a credit card used by your parent or guardian
d)
Open and use a secured credit card
45.
Amy and Chuck each buy a house in the same neighborhood for $250,000. Amy's monthly mortgage payment is $400 more per month than Chuck's. Which one of the following statements could explain this difference?
a)
Amy chose a shorter term for her mortgage, so her monthly payments are higher
b)
Amy made a larger down payment, so her monthly payments are also larger
c)
Chuck chose a shorter term for his mortgage, so his monthly payments are also lower
d)
Chuck has a lower credit score, so his interest payments are also lower
46.
Why are payday loans so much easier to qualify for than traditional bank loans?
a)
Payday loans are only used by affluent households, and the banks know they have enough money to cover them
b)
Payday loans are just another word for direct deposit, and almost all employers offer their employees direct deposit instead of a paper paycheck
c)
Payday loans require proof of employment or other regular income but not a credit check
d)
Payday loans are typically for such small dollar amounts that no one cares if you repay them or not
47.
Trudy tells her mom that she wants to buy a house within two years of graduating from college. Her mom says Trudy will need a down payment first. What is a down payment?
a)
A large sum of money you pay when taking out a mortgage so that the principal of your loan is smaller
b)
A specific type of tax advantaged bank account used for saving money to buy a house
c)
The first year’s worth of property taxes, held in reserve
d)
A prepayment to a real estate agent so that they will start helping you house hunt
48.
Duc has a credit card with a $1000 credit limit. His outstanding balance is currently $800. What is the maximum amount he can now spend on this credit card?
a)
$200
b)
$800
c)
$1000
d)
$1800
49.
Which of the following statements is true about this Schumer Box?
a)
Depending on your creditworthiness, the APR for a borrower will always either be 8.99%, 10.99% or 12.99%
b)
There is an introductory APR that is valid only for 1 year, but then the permanent APR is lower than that at 8.99%.
c)
You will never be charged an APR higher than 14.99%
d)
A 28.99% APR may be applied to your account for late payment
50.
Why would credit card companies prefer that their cardholders make the minimum monthly payment every month rather than paying their total balance in full?
a)
This is required by federal law for tax purposes
b)
This allows the card holder to pay their bill quickly and close the card when they’re ready
c)
This enables the credit card company to make more money
d)
This helps cardholders develop financial independence
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