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Worksheets11 12 13 Chapter on Debt in Finance for the People
Total questions: 62
Worksheet time: 31mins
What do credit scores help lenders determine?
The likelihood that they’ll get paid back
The interest rate on a loan
The amount of money to lend
The borrower's employment history
What is the modern system of credit scoring known as?
FICO score
Credit Karma
Equifax rating
TransUnion score
Who founded the company that originated the modern credit scoring system?
Bill Fair and Earl Isaac
John Doe and Jane Smith
Mark Twain and Charles Dickens
Albert Einstein and Isaac Newton
What is a potential conflict of interest mentioned in Finance for the People regarding credit scores?
Credit scores are used to help individuals manage debt.
Credit scores are controlled by the individuals themselves.
Credit scores create a conflict of interest for agencies that regulate them.
Credit scores are irrelevant to financial institutions.
According to Finance for the People, what is one way credit scores can negatively impact people in poverty?
They make it easier for people in poverty to access loans.
They have no impact on people in poverty.
They penalize people in poverty for needing credit.
They provide financial benefits to people in poverty.
What does Finance for the People suggest about the role of credit scores in economic and racial inequities?
Credit scores have no impact on economic and racial inequities.
Credit scores help eliminate economic and racial inequities.
Credit scores highlight existing economic and racial inequities.
Credit scores are irrelevant to economic and racial inequities.
What is the suggested approach to dealing with the credit scoring system according to Finance for the People?
Ignore the credit scoring system entirely.
Understand and critique the system to address systemic issues.
Accept the system as it is without question.
Focus solely on improving personal credit scores.
What is Finance for the People advice regarding obsession with credit scores?
Obsessing over credit scores is essential for financial success.
Credit scores should be the only focus in financial planning.
Avoid getting too obsessed with credit scores as they are just a tool.
Credit scores are the most important aspect of personal finance.
What is the primary purpose of learning to play the credit game?
To improve your gaming skills
To enhance your financial literacy
To impact your ability to rent an apartment or house
To increase your social media presence
What is a credit report?
A list of your monthly expenses
A history of most instances you used credit or borrowed money
A summary of your bank account balance
A report card from school
What does a credit score represent?
Your annual income
A three-digit grade based on an algorithm measuring credit risk
The number of credit cards you own
Your total savings in the bank
What percentage of your credit score is made up of your payment history?
25 percent
35 percent
45 percent
55 percent
Which of the following is NOT one of the three major credit bureaus in the U.S.?
Experian
TransUnion
Equifax
CreditKarma
What is the recommended credit utilization ratio to maintain a good credit score?
10 percent
20 percent
30 percent
50 percent
How is the credit utilization ratio calculated?
Total credit balance divided by total available credit
Total available credit divided by total credit balance
Total credit balance plus total available credit
Total available credit minus total credit balance
What impact does a high credit utilization ratio have on your credit score?
It increases your credit score
It has no effect on your credit score
It decreases your credit score
It doubles your credit score
What is one way to potentially increase your credit score mentioned in the text?
Close unused credit card accounts
Ask for a higher credit limit
Spend more on your credit card
Pay only the minimum balance
What is the significance of the length of credit history in determining credit scores?
It has no significance
Longer credit history generally leads to a better score
Shorter credit history is preferred
It only matters if you have a high credit limit
What is the impact on your credit score when you apply for new credit?
It temporarily lowers your score.
It permanently lowers your score.
It temporarily raises your score.
It permanently raises your score.
Why do credit agencies discourage frequent applications for new credit?
To encourage borrowing more.
To prevent the risk of borrowing too much.
To increase credit scores quickly.
To reduce the number of credit cards.
What is considered a better form of debt than a credit card?
Variable rate loans
Fixed term loans
Payday loans
Store credit cards
What is the benefit of having an average to above-average credit score?
Higher interest rates
Better credit and debt options
More frequent credit checks
Increased loan rejection
How often should you review your credit report to ensure accuracy, according to Professor Jimerson?
Every month
Every six months
Every four months
Once a year
What is one of the authorized websites to get a free credit report?
freecreditreport.com
annualcreditreport.com
creditkarma.com
mycreditreport.com
What is the essence of borrowing and saving according to Finance for the People?
Time management
Time travel
Resource allocation
Investment strategy
What does saving involve according to Finance for the People?
Moving resources from the future to the present
Moving resources from the present into the future
Increasing current resources
Decreasing future resources
What does borrowing money entail?
Moving resources from the present into the future
Moving resources from the future to the present
Increasing current resources
Decreasing future resources
What is the main rationale behind "smart" debt according to Finance for the People?
To consume things in the present
To build future wealth
To avoid all forms of borrowing
To rely on lenders for financial advice
What is one of the challenges mentioned in Finance for the People when deciding to take on debt?
Knowing the exact future job you will have
Lacking perfect information about the future
Understanding the terms of borrowing
Avoiding all financial responsibilities
According to Finance for the People, what is the first filter in deciding if you should take on debt?
Whether you can afford to pay it back each month
How much you can borrow
The interest rate offered by the lender
The reputation of the lender
What is one step to take when deciding to borrow money in the form of a mortgage or student loan?
Determine your monthly income
Calculate your debt-to-income ratio
Find out how much you need to borrow and repay each month
Create a spending plan
What tool can help you understand what your monthly payment will be for a loan?
A financial advisor
A simple online loan calculator
A budgeting app
A credit score report
What does the debt-to-income ratio help determine?
Your total savings
Your monthly expenses
How much of your income goes to paying debts
Your credit score
Why is it important to revisit your spending plan after determining your monthly loan payment?
To increase your income
To ensure the payment is affordable
To calculate your total debt
To find new investment opportunities
What is the first step in calculating your current DTI ratio?
Divide your total monthly debt payment by your monthly gross income.
Add up your monthly debt payments including credit cards, loans, and mortgage.
Multiply the result by 100 to solve for your DTI percentage.
Consider the cost of the loan you are considering taking on.
What does a debt-to-income ratio of up to 15 percent indicate?
A person is at high risk of not paying at all.
A person is a great person to lend to.
A person is considered to have a reasonable amount of debt.
A person is a good bet for lenders.
What is the general rule regarding DTI for loan approval?
The higher the DTI, the better the chances of getting approved.
The lower the DTI, the better the chances of getting approved.
DTI does not affect loan approval chances.
A DTI of exactly 50% is ideal for loan approval.
What is the debt-to-assets ratio used for?
To determine how much income you have.
To determine how much debt you can afford.
To calculate your monthly expenses.
To assess your credit score.
What is considered a healthy debt-to-assets ratio?
50 percent or less
30 percent or less
70 percent or less
90 percent or less
What should you do after calculating your current debt-to-assets ratio?
Ignore the ratio and continue borrowing
Add in the additional debt for the loan you are considering
Immediately pay off all debts
Invest in more assets
What is a key factor to consider when shopping for a loan?
The first lender you find
The interest rate and repayment terms
The color of the lender's logo
The location of the lender's office
What is installment debt?
A loan with a variable payment each month
A loan with a fixed payment each month
A loan that requires no payments
A loan that increases payments over time
Why is it important to compare offers from different lenders?
To find the lender with the best office decor
To ensure you get the best deal possible
To make the process more complicated
To avoid borrowing money altogether
What is a characteristic of a "boring" loan?
It has unpredictable payments
It has a fixed payment each month
It requires a large sum upfront
It changes interest rates frequently
What is a fully amortized loan?
A loan where only interest is paid initially
A loan with a fluctuating interest rate
A loan where both principal and interest are paid over time
A loan with no interest
What is an interest-only loan?
A loan where you pay both principal and interest from the start
A loan where you only pay interest for a fixed period
A loan with a fixed interest rate
A loan with no payments required
What is an adjustable-rate loan?
A loan with a fixed interest rate
A loan where the interest rate can fluctuate
A loan with no interest
A loan with a fixed monthly payment
What is one of the key considerations when deciding to borrow money according to the text?
The color of the currency
The terms of the loan, such as interest rate and repayment schedule
The design of the bank's logo
The popularity of the lender
What should you consider about the interest on a loan?
Whether it is simple or compounded
The color of the interest statement
The size of the interest document
The font used in the interest agreement
What is the importance of second-order thinking when deciding to borrow money?
It helps you choose the best bank
It allows you to explore consequences beyond the first decision
It ensures you get the lowest interest rate
It guarantees loan approval
What does borrowing money cost according to Finance for the People?
Time
Life energy
Happiness
Relationships
What is one way to determine if borrowing is worth it?
Consult a financial advisor
Know yourself really well
Compare interest rates
Ask friends for advice
What should you do when using the information to make decisions, according to the text?
Ignore your feelings and focus on logic.
Ask yourself a question and imagine various outcomes.
Consult a financial advisor immediately.
Make decisions based on wants rather than needs.
What is the main topic of Chapter 13 in Finance for the People?
How to invest in the stock market.
Strategies for saving money.
Navigating student loans.
The benefits of credit cards.
What should you do when making decisions according to Finance for the People?
Ignore your feelings.
Imagine various outcomes one at a time.
Make decisions quickly without thinking.
Ask others for their opinions.
What is the main topic of Chapter 13?
Managing credit card debt.
Spending a long weekend with student loans.
Investing in the stock market.
Buying a new car.
What does the author suggest is important when navigating student loan debt?
Arming yourself with knowledge
Ignoring the debt
Paying it off immediately
Relying on family support
What is the main difference between federal loans and private loans?
Federal loans are issued by the government, while private loans are issued by financial institutions.
Federal loans have higher interest rates than private loans.
Private loans offer more repayment options than federal loans.
Private loans are only available to undergraduate students.
Which type of loan generally has lower, fixed-interest rates?
Federal loans
Private loans
Credit card loans
Payday loans
What should you know about your loans to avoid surprises later?
The type of loan and its terms
The color of the loan document
The name of the bank teller
The interest rate of your credit card
is a three-digit number that rates your creditworthiness. The higher the score the more likely you are to
get approved for loans and for better rates.
Federal Reserve
CCC
Credit Score
Credit Card
Is a lower or higher credit score better?
Lower
Higher
