WorksheetsUnit 2 Credit and Loans Test
Total questions: 30
Worksheet time: 3hrs 30mins
What is the term for the cost of borrowing money, typically expressed as an annual percentage of the loan amount?
Principal
Interest rate
Credit line
Loan term
Which of the following factors does NOT affect your credit score?
Payment history
Employment status
Credit utilization ratio
Types of credit in use
Paying more than the minimum payment on a loan each month can:
Increase the total interest paid over the life of the loan
Decrease the total interest paid over the life of the loan
Have no effect on the interest
Result in a penalty for early repayment
What is the main benefit of having a good credit score?
Eligibility for higher-paying jobs
Access to better interest rates on loans
Automatic approval for all credit card applications
No need for a security deposit on utilities
Which of the following is a strategy to manage and repay multiple loans effectively?
The snowball method
Only paying the minimum amount due
Taking out a new loan to cover the old ones
Missing payments to save money
What is a secured loan?
A loan that does not require any collateral
A loan backed by a guarantor
A loan that is secured by collateral, such as a house or car
A loan given only to individuals with secure employment
Aria is reviewing her credit card statement and notices a term she doesn't understand. What does APR stand for?
Annual Percentage Rate
Automated Payment Requirement
Additional Payment Rate
Approved Personal Rate
Which of the following can increase your credit score over time?
Frequently applying for new credit cards
Maintaining a high balance on your credit cards
Paying loans on time
Closing old credit accounts
What is a grace period in terms of credit card payments?
The time you have to wait before applying for a new credit card
The time during which no interest is charged on a new purchase if the balance is paid in full by the due date
The period after the due date during which you can pay without being charged a late fee
The time frame in which you can dispute a charge on your credit card
What happens if you only make the minimum payment on your credit card each month?
You will pay off the balance faster
You will avoid all interest charges
You may end up paying more in interest over time
Your credit score will increase significantly
What is the impact of late payments on your credit score?
It increases your credit score
It has no impact on your credit score
It decreases your credit score
It freezes your credit score
What is the term for the maximum amount of credit a financial institution extends to a client?
Credit limit
Loan term
Interest rate
Principal amount
What is the purpose of a credit report?
To track your spending habits
To provide a history of your borrowing and repayment, including any late payments
To calculate your annual income
To determine your eligibility for a job
a number assigned to a person that indicates to lenders their capacity to repay a loan.
Credit score
Credit report
Credit history
Credit bureau
Which of the following has no effect on the monthly payment when purchasing a car on a loan?
What does defaulting mean?
Getting a good credit score
Building credit history
Failing to pay your debts
Opening many credit card accounts at the same time
Which is the best credit score?
500
850
300
700
1000
Which is NOT part of your credit report?
Your bank balance
Your current home address
The number of times you have filed for bankruptcy
The number of inquiries made about your credit
If you are too young to be granted credit yet, you need a loan to purchase an expensive item like a car, what might you do?
Ask a friend/family member, to co-sign on the loan
Request your credit history
Allow someone else to apply for the loan for you
Open two lines of credit at the same time
To use a credit card responsibly, you should do what?
pay off the balance in full each month
understand your interest rate and how credit works
not apply for several credit cards in a short period of time
All of the above
Cash back or air miles for purchases made
better fraud protection if your card gets hacked
A person who agrees to pay off a loan if the original party does not pay
Collateral
Character
Character
Cosigner
Which of the following is not one of the three credit bureaus
Equifax
Enterprise
TransUnion
Experian
Select the statement that is true.
Net Worth is a number that shows how good we are at paying back the money we have borrowed
Banks look at our credit score before they decide on whether to give us a loan or not
People with a good credit score are charged a higher rate of interest
Banks cannot refuse to give us a loan even if we have a low credit score
What is bankruptcy?
Bankruptcy is a method to avoid paying debts
Bankruptcy is a process for individuals to increase their wealth
Bankruptcy is a legal process for individuals or businesses unable to repay their debts, providing relief from some or all of their debts.
Bankruptcy is a financial strategy to double one's assets
Which of the following are ways to build credit before the age of 18?
Get a loan with a cosigner
Become an authorized user on a credit card
Open up a credit builder savings account
all of these are correct
Which of the following statements is TRUE:
Applying for several lines of credit in a short period of time can help boost a person’s credit score.
Paying off a credit card balance in full can have a negative impact on someone’s credit score.
The longer you use credit responsibly, the higher your credit score.
Low risk borrowers tend to have low credit scores.
Which of the following is a good debt repayment strategy?
Paying only the minimum amount due each month
Ignoring your debts until you are in a better financial situation
Paying off the debt with the highest interest rate first
Taking out another loan to pay off your debt
How can having a mix of credit accounts, such as a mortgage, car loan, and credit cards, affect your financial flexibility?
It limits the amount of credit you can access
It can improve your creditworthiness by showing you can manage different types of credit
It makes financial management more complex
It has no effect on financial flexibility
Why should someone care to check their credit score and credit report?
All of these are correct.
You will need credit in order to advance your young adult life.
To have a good idea of approval odds and interest rates before applying for a loan.
