WorksheetsFM * Managing Credit- Unit Test B
Total questions: 25
Worksheet time: 13mins
Name
Class
Date
1.
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
2.
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
3.
Theo has significant debt and is considering filing for Chapter 7 bankruptcy. He should try all of the following strategies before filing for bankruptcy, EXCEPT…
a)
Meeting with a credit counselor
b)
Paying a debt settlement company
c)
Using a debt repayment strategy, like the Snowball or High Rate Method
d)
Setting up a debt management plan
4.
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)
5.
What is the difference between Chapter 7 and Chapter 13 bankruptcy?
a)
Chapter 7 bankruptcy is for individuals; Chapter 13 bankruptcy is for corporations
b)
Chapter 7 bankruptcy sells your assets; Chapter 13 bankruptcy allows you to keep assets if you follow a repayment plan
c)
Chapter 7 bankruptcy only eliminates student loan debt; Chapter 13 bankruptcy eliminates all your debts
d)
There is no meaningful difference; both Chapter 7 and Chapter 13 bankruptcy clear your debts by selling off your assets and stay on your credit report for 10 years
6.
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
7.
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
8.
How can debt increase a person’s net worth?
a)
The more debt you take on, the higher your credit score
b)
Debt allows you to buy valuable assets, like a house
c)
Using debt, you can spend more than you earn
d)
Debt increases your liabilities, like your credit card balance
9.
Frank and Jasmine 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 Jasmine 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
10.
It is illegal for a lender to do all of the following, EXCEPT…
a)
Charge someone a high interest rate (above 20% APR) on a credit card
b)
Discourage someone from applying for a home loan based on their race
c)
Publish someone’s credit report publicly online
d)
Change the terms of someone’s loan without notifying them
11.
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
12.
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
13.
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
14.
What does a credit counselor do?
a)
Decides whether or not the bank should issue a loan to someone
b)
Provides low-cost financial advice and creates debt management plans
c)
Collects debts that are owed to creditors and over 180 days late
d)
Co-signs loans to minimize financial risk for a borrower
15.
What does the term “buy, borrow, die” describe?
a)
The strategy used by wealthy Americans to leverage debt to minimize taxes
b)
The pattern where high-interest loans trap people in a cycle of debt
c)
The necessity of using debt to achieve common milestones, like buying a house
d)
The long-term nature of repaying large debts
16.
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
17.
Which of the following statements about bankruptcy is TRUE?
a)
It is the recommended first step if your debts exceed 30% of your income
b)
It stays on your credit report forever
c)
It eliminates all of your debts for free
d)
It decreases your credit score significantly
18.
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
19.
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
20.
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."
21.
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
22.
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
23.
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
24.
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
25.
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
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