WorksheetsCredit & Debt Quiz
Total questions: 25
Worksheet time: 13mins
Which of the following statements comparing credit and debit cards is TRUE?
Far more businesses accept credit cards than debit cards
Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard
Credit card companies provide you with a monthly statement, while debit cards do not
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
Which of the following is most likely to represent a fixed rate, secured debt?
A student loan
A credit card
A prepaid debit card
An auto loan
If you are having trouble making auto loan payments and are really following a tight budget, which recommendation below represents the WORST advice?
Find an extra source of income by taking a second job, working longer hours, or borrowing from family if they can afford to help
Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control
Continue making all payments and call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms
Explore whether a free or non-profit credit counseling service could help
Which of the following is true about fixed and adjustable-rate mortgages?
Fixed-rate mortgages have a constant payment every month, but an interest rate that increases throughout the term of the loan
Fixed-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions
Adjustable-rate mortgages have a fixed interest rate for a few years, after which time the interest rate fluctuates according to general market conditions
The two mortgages work the same way but are called different names depending if they come from a bank or a credit union
Which of these credit payback strategies would lead to the HIGHEST overall cost?
Paying off your credit card bill in full every month
Paying 20% of your credit card balance every month on time
Making the minimum payment (3% of your credit card balance) every month on time
Making the minimum payment (3% of your credit card balance) every month with an occasional late payment
What is an advantage of using a credit card?
It will not affect your credit score or credit history
Since it ties 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
A loan with a shorter term length will have __________ monthly payments, and you will pay __________ in total interest.
higher, less
higher, more
lower, less
lower, more
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
Which of the following statements is CORRECT about secured loans?
They are a good choice to use for student loans
If the borrower does not make payments, the lender can repossess the item
In the event of default, the borrower loses nothing except for the down payment
They usually have higher interest rates as compared with unsecured loans
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 would credit card companies prefer that their cardholders make the minimum monthly payment every month rather than paying their total balance in full?
This is required by federal law for tax purposes
This allows the card holder to pay their bill quickly and close the card when they're ready
This enables the credit card company to make more money
This helps cardholders develop financial independence
What are the two most important factors in calculating your credit score?
Payment history and types of accounts
Amounts owed and length of credit history
Payment history and total debt
Length of credit history and new credit inquiries
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
Which of the following methods of getting your credit score would involve paying a fee?
Checking your credit card or loan statement
Talking to a non-profit counselor
Checking creditkarma.com
Getting a score from myFICO.com
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
Melvin is 19 years old and wants to begin establishing a credit history. Which action should he take to meet that goal?
Always say "credit" when asked "credit or debit?" at a store
Ask his parents to cosign a credit card or add him as an authorized user on their credit card
Any time he borrows money from a friend or family member, be sure to pay it back promptly
Take out some private student loans, even though he doesn't need them because he has grants and scholarships
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?
Use less than 30% of the credit limit and pay it off in full every month by the due date
Always carry a balance from month to month
Regardless of how much your balance is, make the minimum payment required on your credit card every month by the due date
Put the credit card in a drawer instead and don't ever use it
Who tracks all of your credit information?
Credit reporting agencies (Equifax, Experian and TransUnion)
Federal government
Consumer Financial Protection Board (CFPB)
Lenders
Which of the following things should you have ready when contacting a credit reporting agency to report an error on your credit report?
Your preferred payment method to pay for fixing the error
A list of all of your financial accounts and balances
An explanation of the mistake and any evidence you have supporting your claim
References from a non-family member vouching for your creditworthiness
Which of the following could have a NEGATIVE impact on your credit score if done in a short period of time?
Paying your bills on-time
Paying down balances on your credit card accounts
Decreasing your utilization of credit
Applying for multiple credit cards
What benefits do you receive by taking out a loan with a cosigner?
You don’t get penalized for late payments
You get a discount on future loans after this one is paid off
You have a better chance of getting approved and getting a lower interest rate if the cosigner has good credit
You automatically get the same credit score as the cosigner once the loan is paid off
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 unsecured 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
What is the general timeline to establish your first credit score?
As soon as you apply for a credit card or loan
Six months after you first actively use your credit
Once you pay all of your credit balances in full
Once you turn 18
